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2023 Recap
Our Businesses
Our Regions
Strategic Direction
Corporate Sustainability
Financial Performance in Fiscal 2023
New Products
Conclusion
Bio-Techne vs. S&P 500 Index
Board and Executive Team Summary
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03
2023 ANNUAL REPORT // Bio-Techne 20232023
A Building Year...
Our entire industry suffered post traumatic
COVID market stress in 2023!
Coming off two years of amazing growth, which for us
was 22% in 2021 and 17% in 2022, we and all our peers
faced a bit of reality. We accomplished 5% organic
growth, but on an expectation of 10%.
No one hit their expectation and the
surpassed 100,000 tests! Cell and
and Genomics (three divisions). We
“pause” in our industry continues. Not so
Gene Therapy growth also remained
surpassed 3,000 employees – 2,300
much for us, as we see the destocking,
high double digit while Spatial Biology
more than when I started 10 years ago.
China meltdown and conservative
Biotech funding trends beginning
to subside in Q1 2024. It was a great
year with many accomplishments and
overall, our thesis to $2B in revenue
remains largely intact. With the
M&A climate subdued this year we
managed to achieve an acquisition of
LunaphoreTM, the highly sought after
spatial biology automation company,
and we also triggered phase one of
the acquisition of Wilson WolfTM, the
world leader in cell therapy bioreactors.
Exosome remained near 75% organic
growth all year, building on the final
acceptance by NGS (our MAC) of all
the NCCN guidelines attributed to
our ExoDx Prostate Test. We have now
remained at low double-digit growth.
We are still a lean and mean machine
This is important as these are our
though, with ever increasing revenue
high-growth future platforms. Nothing
per employee. The operational prowess
has changed. Being a building year,
of this company continues to amaze me
we worked hard on our go-to-market
and make me proud.
digital strategies and supply chains,
opening a new warehouse for Europe in
Ireland, improving the One Bio-Techne
website, continued implementing a new
ERP system for Europe with little to no
effect on our business and hiring new
executives to run EMEA, the Reagent
Solutions Division (RSD) and our U.S.
Commercial operations. The company
organizational structure remains the
same, following a subsidiary model
approach, across two segments: Protein
Sciences (two divisions) and Diagnostics
Before we dig into the businesses, I
want to thank Gary Stapleton, our EMEA
Vice President who retired in 2023
after six years of leading the region
for the company. Under Gary’s watch,
the business more than doubled and
the headcount as well. He set up four
distinct subsidiaries and led multiple
acquisitions that will fuel our growth in
Europe for years to come.
04
2023 ANNUAL REPORT // Bio-Techne FY2023 Wins:
Lunaphore Acquisition Announced
Phase I Acquisition of Wilson Wolf
Surpassed 100,000 ExoDx™ Prostate Tests
Exosome Remained Near 75% Organic Growth
Charles (Chuck) Kummeth
President and Chief Executive Officer
05
2023 ANNUAL REPORT // Bio-Techne Our
Businesses
We have five divisions to update you on.
Most have made great progress this past year,
but some in our core had a tough year due to
what we have been calling the COVID hangover.
Starting with the Diagnostics and Genomics Segment (DGS)
COVID offering, this division performed in the mid-single digit
and the Molecular Diagnostics Division (MDD), which is made
growth range, a couple points under where we had hoped.
up of ExoDx and our AsuragenTM businesses, both had a
However, the portfolio is strong, and we have increased the
great year. ExoDx ended the year with over 40,000 tests and
size of our team globally, to improve the deal pipeline. This is
revenue growth of 70+%. We have made enough progress
a high-single digit grower in the future and much more steady
with private payers that we have moved to accrual accounting.
and less volatile than it used to be.
Thermo FisherTM is making progress with their license of our
ExoTruTM test, a kidney transplant rejection test and we hope
to see it in the market in the coming year, yielding more
milestone payments and royalties to Bio-Techne. Asuragen
launched their business directly in Europe and we saw
extraordinary growth. We also launched the CFTE test and
Moving to the Protein Sciences Segment (PSS), and starting
with the best of the segment, our Cell and Gene Therapy
business unit within the Reagent Solutions Division (RSD)
continues to rocket forward with strong organic growth of
20+%. The biggest contributor was GMP proteins of course
growth for the business was a solid double digit. Our Spatial
where we introduced six new products and are currently at
Biology Divison (SBD) also had a reasonable year with 10+%
a $40MM+ annual run rate with strong double-digit growth.
growth. We extended the menu with 5,700 more RNAScopeTM
The new factory continues to surprise us to the upside. When
probes (45,000+ total) and also launched our Co-Detection
we opened it, we felt with current yields we could generate
test which does dual detection of both RNA and proteins. This
$200MM in product revenue before expansion was needed.
will be the foundation of our move into higher plex translation
We now think we can produce between $800MM and $1.5B
using the Lunaphore platform, stimulating growth into the very
in revenue depending on the product mix. Our pipeline of
large pathology market. Very exciting
times for SBD! The business is now over
$100MM, making it the largest Spatial
Cell analysis business in the industry. We
see many, many years of double-digit
growth with this immensely popular
SBD business is now over $100MM,
making it the largest Spatial Cell
analysis business in the industry.
GMP customers is steadily growing as
are their demands as they grind through
their clinical trials. We currently have
over 180 customers! Another major
accomplishment is our acquisition of
20% of Wilson Wolf (WW), the world’s
platform. Rounding out the DGS segment is our Diagnostics
leading cell therapy bioreactor solution. WW is in dozens of
Reagents Division (DRD). Largely OEM and with a strong
clinical trials today, has the process of record for two therapies
06
2023 ANNUAL REPORT // Bio-Techne cleared by the FDA and on the market, and has over 800
quarters with some instruments, like Simple WesternTM,
customers! The value of this asset is immense and it is now
growing over 50%! We knew this would be a difficult year, but
on a glide path to be fully acquired by Bio-Techne. We now
we did still grow 5%. The team did a great job innovating with
W I L S O N W O L F F O R E C A S T
Full company 10 year
forecast model is
$4–5B in revenue
have a 10-year GMP forecast
new applications and products to find even more markets
model, that with WW,
and customers to service. One example is the MauriceFlexTM
achieves $2B in revenue.
system, announced mid-year. This is a very important new
The full company 10 year
platform that doubles the addressable market for the Maurice
forecast model is $4-5B in
Biologics system. This new product allows the elimination
revenue! Good times are
of HPLC and can integrate directly to Mass Spec, a required
ahead.
process step in Biologics manufacturing. Very exciting and we
have incredible initial demand. Assays were very similar to the
Reagents in RSD. Lots of stocking in 2022 and we are hoping
we are near the end of this destocking cycle. Our LuminexTM
platform continues to do well. We have moved from a fourth
or fifth position in share to number two in our estimation.
Incredible work by the team as we sell our own assays and
content with royalties to most of our competition.
The remaining Core RSD business had a tough year. Growth
was 3%. Disappointing, but we know what happened. This is
where most of our OEM large bulk orders are, which softened
due to customers mitigating their supply chain risk and
ordered ahead very early in the year or even 2021. This run
rate risk mitigation extended into our general catalog, so we
spent most of 2022 in a “destocking” environment. The good
news is that we are a run rate business and customers are
running out of supplies. Overall, research softened in 2023
due to growing conservatism in our markets and the overall
economy. We see an improvement in 2024 across the board
but especially in Proteins and Antibodies.
Analytical Solutions Division (ASD) was a similar story to RSD
but not as bad. We had such incredible comps in instrument
growth in 2022 that it was a hurdle that was difficult to
circumvent. Growth in 2022 was nearly 20%. We had many
07
2023 ANNUAL REPORT // Bio-Techne Our
Regions
North America
Europe
Ottawa, Canada
Abingdon, UK
Toronto, Canada
Bristol, UK
Atlanta, GA
Austin, TX
Denver, CO
Devens, MA
Dublin, Ireland
Langley, UK
Milan, Italy
Paris, France
Emeryville, CA
Rennes, France
Minneapolis, MN (2)
Weisbaden, Germany
Newark, CA
St. Paul, MN
San Jose, CA
San Marcos, CA
Wallingford, MA
Asia
Beijing, China
Osaka, Japan
Pune, India
Seoul, South Korea
Latin America
São Paulo, Brazil
Singapore
Tokyo, Japan
Ghangzhou, China
Hong Kong
Shanghai, China (3)
08
Global
Headquarters
Minneapolis, United States
European
Headquarters
Abingdon, United Kingdom
China
Headquarters
Shanghai, China
As we adapt to change, our sales force
and leadership propel us forward, with
the Americas as the catalyst for our
next chapter of growth and innovation.
EMEA had an extremely tough comp from 2022 of nearly 16%.
Given that, plus the destabilizing war in Ukraine, as well as
an overall growing conservatism in Biopharma in Europe, we
still found growth of 7%. We had a great start with Asuragen
products launching during the fiscal year. We see good upside
in the three main products in the AmplitudeXTM genetics
suite of products for the FMR1, SMN1/2, and CFTR genes –
the three most common carrier screening genes. The sales
force is in place and executing well. We have a new leader in
Europe. Peter Schüßler started in May and already is making
a difference coming from a strong life sciences background
in Thermo Fisher. He will focus on our commercial execution,
2023 ANNUAL REPORT // Bio-Techne Europe is now over 300 people,
>$200MM in revenue and built
on four main subsidiaries in
U.K., France, Germany and Italy.
Global
Headquarters
Minneapolis, United States
European
Headquarters
Abingdon, United Kingdom
China
Headquarters
Shanghai, China
We now have an even better,
larger team in India ready to
capitalize on the expected
market growth.
supply chains for Europe, customer satisfaction and our
show growth of 6% for the year and off a large comp in 2022,
website experiences that affect our run rate. Europe is now
but not the results we were expecting. China should be back
over 300 people, >$200MM in revenue and built on four main
to 20+% growth once government funding returns. The rest
subsidiaries in U.K., France, Germany and Italy. We service
of APAC is mixed. This was the worst year in 10 in South Korea
Eastern Europe via distributors. Europe is set up to win now
for all the same reasons and we hope to ride the market
better than ever with strong leadership, strong infrastructure
comeback in 2024. India is showing strong promise now. You
and a rebuilt commercial team. China is another building
may recall we had just introduced investment in India when
year story, coming off a year of 23% organic growth. For most
COVID hit. We now have an even better, larger team in India
of the year, China was shut down due to COVID. As things
ready to capitalize on the expected market growth.
opened up, we expected a big surge similar to 2020. Not the
case, however. The government has delayed stimulus and
life sciences funding until later in calendar year 2023. We did
09
2023 ANNUAL REPORT // Bio-Techne Strategic
Direction
Our strategies have worked and remain the same. We aspire to
be a differentiated product innovation company, focused on
life sciences, but also focusing on geographic expansion and
M&A to continue and further accelerate our growth. In detail,
our strategies are the following:
Invest
Expand
Acquire
Invest further into
Expand regionally with smaller ”tuck-in” acquisitions.
Acquire “new to the world”
GMP grade reagents,
focusing on supporting
the rapidly expanding
immunotherapeutic and
regenerative medicine
markets. This includes GMP
grade proteins, GMP grade
recombinant antibodies, cell
expansion media, and other
critical reagents.
Expand our GMP workflow offering, including
reagents, equipment, Cell Therapy processes, cell
preservation, cell culture media and electroporation.
Expand our assay portfolio, including Simple PlexTM
and other multiplex platforms, and obtain greater
value from resellers that use our content in their own
assay products.
Expand in Cancer Diagnostics, leveraging the
Advanced Cell Diagnostics and Exosome diagnostics
platforms as well as therapeutic tools to support new
areas like CAR T, NK cell, and regenerative medicine-
based therapy.
instrument technologies that
can leverage our reagents and
offer researchers full solutions.
Areas of focus are automation
for Spatial analysis, Multiplex
innovation and cell biology.
Acquire new talent and
intellectual property to help
the company with its next
phase of accelerated growth.
Continue to expand regionally.
China is still important but
India, Korea and Japan also to
be focused on.
Inspire innovation within the company through scientific collaboration and support of
key opinion leaders, expanding our intellectual property and product portfolios. Our “Tech
Council” is yielding many cross divisional new ideas that fuel our product innovation.
10
2023 ANNUAL REPORT // Bio-Techne Corporate
Sustainability
Bio-Techne cultivates durable, sustainable
growth through a focus on EPIC values
and operational excellence.
Bio-Techne cultivates durable, sustainable growth through a
evolution and directional focus over the past year. In addition
focus on EPIC values and operational excellence. This focus
to the SASB standards to which we continue to align, this year
includes an enduring, expanding commitment to our four
we index the contents of our CSR against the Task Force on
key pillars of sustainability: Our People, Our Commitment
Climate-Related Financial Disclosures (TCFD). Going forward,
to Advancing Science, Governance and Operational
we plan to be guided by TCFD’s framework in shaping our
Integrity, and Our Commitment to the Environment. In close
sustainability disclosures and strategy. In addition, Bio-Techne
engagement with Company leadership, the Bio-Techne
has continued to operationalize data collection and data
Board and its committees oversee and monitor our strategic
measurement across numerous sites, expanding the data
plans and progress regarding sustainability, including
collected as we continue to assess the overall impact our
regular updates on environmental sustainability projects and
operations have on the environment. We have also prioritized
progress, talent and retention reviews, review and refreshment
numerous sustainability initiatives, including ISO 14001
of Board and Committee policies, and ongoing discussion
certifications at additional sites and packaging redesign
and navigation of sustainability risks and opportunities at each
projects designed to reduce waste or non-recyclable materials
Board meeting.
and increasing reliance on solar power.
Bio-Techne relies on its Sustainability
Working Group, a cross-functional,
multi-disciplinary team consisting
of senior leaders within Finance,
Accounting, Operations, Quality,
Human Resources and Legal. The
Sustainability Working Group reports
to the Sustainability Oversight Council
consisting of the company’s five
Executive Officers, and develops
and executes our sustainability
In addition to our efforts on
environmental sustainability, we
are proud of our achievements and
progress across our other pillars,
from the release of approximately
1,600 new and innovative products
to our continued cultivation of EPIC
employees and teams.
In addition to our efforts on
environmental sustainability, we
are proud of our achievements and
progress across our other pillars, from
the release of approximately 1,600
new and innovative products to our
continued cultivation of EPIC employees
and teams. Fiscal year 2023 saw all
employees across all sites return to
work with our focus foremost on health
and safety, followed by an emphasis on
strategy, leveraging the grassroots efforts of its teams to
collaboration, professional fulfillment and personal flexibility.
cultivate sustainability practices and processes throughout
our organization while highlighting to company leadership
opportunities for impactful growth. In thoughtfully mapping
our strategic path forward, we have also partnered with
industry experts to support both strategy and operational
execution.
We have made considerable strides across our four key pillars
and through thoughtful and diverse decision-making guided
by Company leadership and our Board, we have augmented
the resiliency and capability of Bio-Techne’s business. While
we continue to strategically survey and map the next leg of our
journey, I encourage you to read our updated CSR to chart our
This year, we are proud to publish a new Corporate
progress in each of our four sustainability pillars.
Sustainability Report (CSR) highlighting our achievements,
11
2023 ANNUAL REPORT // Bio-Techne Financial
Performance
// in Fiscal 2023
Highlights of our Fiscal Financial 2023 performance:
Adjusted net earnings were $321.5 MM compared to $323.5 MM in the prior year.
Cash from operations was $254.4 MM
Adjusted earnings per share were $1.99, compared to $1.97 last year., despite
for the year. We returned $50.3 MM to our
currency exchange unfavorably impacting earnings per share by $0.08, or 4%.
shareholders in the form of dividends.
Overall, revenue increased 3% to $1,137 MM. Organic revenue was 5% over the
Successful execution in our long-term
prior year, with currency translation having a negative impact of 2% and acquisitions
strategic growth platforms with record
contributing an immaterial amount to revenue growth.
performance in our ExoDx prostate test
and GMP proteins.
Adjusted operating margins for the year were 36.1%, compared to 38.3% in the
prior year, resulting from unfavorable foreign currency exchange and strategic
investments to accelerate growth in the business.
YEAR ENDED JUNE 30
(In thousands, except per share data)
2023
2022
2021
2020
2019
Net Sales
$1,137M
$1,106M
$931M
$739M
$714M
Adjusted net earnings1
$321M
$324M
$274M
$179M
$175M
Adjusted diluted earnings per share1,2
$1.99
$1.97
$1.69
$1.14
$1.13
Cash flow from operations
$254M
$325M
$352M
$205M
$182M
1. Excludes 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, the revenues and expenses attributable to partially-owned consolidated
subsidiaries, and other non-recurring items including non-recurring cots, goodwill and long-lived asset impairments, and gains. Adjusted net earnings and
earnings per share for fiscal 2021 have been updated for comparability to fiscal 2022 for the inclusion of the impact of partially-owned consolidated
subsidiaries on the Company's adjusted consolidated net earnings and earnings per share. See Item 7 of the Company's Annual Report on From 10-K,
following, for further details.
2. 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.
12
2023 ANNUAL REPORT // Bio-Techne We have designed and built a company based on a subsidiary
model approach which is a highly differentiated portfolio of
over a dozen product platforms spread across five business
units. Many of these platforms could be its own stand-alone
company. Most make money! Some, lots of money. One
usually creates a portfolio for mitigating risk so at any one
time not all can be in a down cycle. In my experience, this
organization design works well because you “divide and
grow”. It is also good operationally and can smooth out
the lumps, so to speak. 2023 was a great year to measure
performance against the “lumps”.
YEAR ENDED JUNE 30
(In thousands)
2023
2022
2021
2020
2019
Cash, cash equivalents and available-for-sale
investments
$204M
$247M
$232M
$271M
$166M
Total assets
$2,639M
$2,295M
$2,263M
$2,028M
$1,884M
Long term debt obligations (1)
$350M
$248M
$354M
$344M
$502M
Total Stockholder's equity
$1,967M
$1,701M
$1,571M
$1,381M
$1,166M
Common shares outstanding (in thousands) (2)
157,642
156,644
155,822
153,812
151,736
Weighted-average common shares outstanding
- diluted (in thousands) (2)
161,855
164,114
161,932
157,602
155,567
(1) Includes long-term contingent considerations payable.
2023 Adjusted Gross Margin:
2023 Adjusted Operating Margin:
2023 Adjusted Operating Income:
FY23
71.70%
36.10%
$410M
13
2023 ANNUAL REPORT // Bio-Techne New
Products
From the new products perspective for
FY23, we continued to expand our menu
of products to make the customer journey
easier and more productive.
Towards these goals we have expanded the number of
In small molecules, we launched 186 new products with
relationships with other reagents or technology providers to
nearly 60% of these manufactured in house. The Vivid
create a broader menu of both products and services that our
fluorescent dyes continue to be popular products and when
customers can avail themselves.
On the Antibody product front,
about 2,134 new products
were introduced to the market
with over 12% of these being
proprietary antibodies.
On the Antibody
product front, about
2,134 new products
were introduced to
the market with over
12% of these being
proprietary antibodies.
The number of antibodies sold as fluorescent conjugates
increased significantly during the fiscal year. The addition of
a recently licensed violet dye is expected to be very helpful in
the antibody-conjugate product lines.
used in combination with TSA can provide exceptionally
bright reporters for detection of low abundance molecules.
Mitobrilliant dyes were also developed to better discern
mitochondrial properties in both live and fixed cells.
On the instruments front, a significant improvement of
capabilities with the launch of MauriceFlex which provides
great freedom and flexibility for both cIEF and CE-SDS assays
on the same system along with peak fractionation capabilities
for further downstream analysis. A total of 27 instruments sold
in the first six months of being on the market exceeded our
expectations. Also, the
launch of the Empower
R E C O M B I N A N T P R O T E I N S
On the recombinant proteins front, 244 total new proteins
were released in FY23. Emphasis was given to redeveloping
21 key products to enhance yield and purity. Some key
product launches were mammalian expressed versions
Driver for Flex helped
with instrument adoption.
All ProteinSimpleTM
instruments continue
of hActivin-A, hTPO, hIL-23 and mouse IL-23. On the GMP
to find great use in the
protein front the release of hIL-4 was an important milestone.
CGT market in evaluating
244
Total New Proteins
14
2023 ANNUAL REPORT // Bio-Techne the quality of viral vectors (AAVs and LVV) produced. Simple
Western is actually being used as a potency test in the Gene
Therapy field.
Our spatial biology ACDTM business launched a new kappa/
lambda immunoglobulin light chains assay used in establishing
clonality in B-cell gammopathies. Additionally, we launched
RNAscope Plus which allows investigators to simultaneously
detect the mRNA of specific interest along with small regulatory
RNAs or other biomarkers at the subcellular level.
For Immunoassays, 36 new Simple Plex Assays were released
in FY23 including five neuroscience biomarkers. A total of 17
QuicKits are currently on the market for those who prefer rapid,
90-minutes assays. Launch of a next generation IL-6 assays on
multiple platforms were an important milestone. Overall success
in multiplex assays with number of assays developed both in
on the shelf and custom work. Our automated immunoassay
platform Ella reached the milestone of having 1,000 instruments
in the field with continued market adoption which justified our
expansion of the Wallingford, Connecticut manufacturing site
for the associated cartridges the instruments use.
Rounding out an exceptional year for innovation, the EPI
E P I P R O S TAT E T E S T
100,000
Tests Conducted!
prostate test experienced a large volume
increase in excess of 70% for FY23 as
well as additional coverage by insurance
carriers. We have crossed over 100,000
tests conducted! And we achieved
complete alignment between the NCCN
guidelines and our MAC, NGS. Our prenatal
genetic testing business also experienced double-digit volume
growth and broader geographic adoption of the various tests.
15
2023 ANNUAL REPORT // Bio-Techne My Conclusion
A year ago, we announced my retirement
at the end of fiscal year 2024.
as CEO
This gave us two years for a proper succession process.
The Board is well underway on that with both internal and
external candidates. One more and final year to go as CEO of
this amazing company. I have enjoyed the journey very much
and love the fact that our 10-year stock appreciation has
achieved a 20% CAGR. Not many companies can say that!
The next ten years will be just as amazing for Bio-Techne.
We have laid the foundation for fantastic growth in growing
markets that serve a huge need in society. Cancer will not
go away by itself. In 10 years, I see this company at $4-5B in
revenue, $2B in EBIDA, 12,000 employees in 10 divisions and
a company sporting a market cap in excess of $40B. I truly
believe this, and the growth needed to achieve this is less
than the growth from the previous 10 years! This is why the
CEO selection is very important. Regardless of a new CEO,
we have great team here at Bio-Techne. The dedication to the
science, shareholders and customers is unmatched. I want
to express my thanks to the team, the shareholders and the
board.
It’s truly been a privilege to serve.
Chuck
16
2023 ANNUAL REPORT // Bio-Techne
17
2023 ANNUAL REPORT // Bio-Techne Bio-Techne vs.
S&P 500 Index
Tech
S&P 500
06-29-2018
06-30-2023
400%
350%
300%
250%
200%
150%
100%
50%
0%
-50%
2019
2020
2021
2022
2023
This graph compares the yearly percentage change in the cumulative total
shareholder return in Bio-Techne common stock during the five years
ended June 30, 2023 with the cumulative total return of the S&P 500 Index.
The comparison assumes a similar investment made on June 30, 2018 in
Bio-Techne common stock and in the above index. The graph is not deemed to
be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy
rules or to the liabilities of Section 18 of the Securities Exchange Act of 1934,
except to the extent that Bio-Techne specifically requests that such information
be treated as soliciting material or specifically incorporates it by reference into
a filing under the Securities Act or the Securities Exchange Act.
Forward Looking Statements
This letter may contain forward looking statements within
There are a number of risks and uncertainties that could
the meaning of the Private Securities Litigation Reform Act
affect actual results. For additional information concerning
of 1995. Such statements involve risks and uncertainties that
such factors, see the section titled “Risk Factors” in the
may affect the actual results of operations. Forward looking
Company’s annual report on Form 10-K and quarterly reports
statements in this letter include statements regarding our
on Form 10-Q as filed with the Securities and Exchange
current views with respect to future events and financial
Commission. We undertake no obligation to update or revise
performance, and include any statement that does not
any forward looking statements due to new information or
directly relate to a current or historical fact. Forward looking
future events. Investors are cautioned not to place undue
statements can generally be identified by words such as
emphasis on these statements.
“believe,” “expect,” “anticipate” or “intend” or similar words.
18
2023 ANNUAL REPORT // Bio-Techne UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2023, or
For the transition period
from to
Commission file number 0-17272
BIO-TECHNE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota
(State or other jurisdiction of
incorporation or organization)
614 McKinley Place N.E.
Minneapolis, MN 55413
(Address of principal executive offices) (Zip Code)
41-1427402
(I.R.S. Employer
Identification No.)
(612) 379-8854
(Registrant’s telephone number, including area code)
Title of each class
Common Stock, $0.01 par value
Trading Symbol(s)
TECH
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
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. (Check one):
Large accelerated filer
Non-accelerated filer
☒
☐
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 Rule 12b-2 of the Act). Yes ☐ No ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statement of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant period pursuant to
Section 240.10D-1(b). ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
As of December 31, 2022, the aggregate market value of the Common Stock held by non-affiliates of the Registrant was $13.0 billion based upon the closing sale price as reported on The Nasdaq Stock Market ($82.88 per share). Shares of
Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded.
As of August 16, 2023, 158,174,312 shares of the Company’s Common Stock ($0.01 par value) were outstanding.
Portions of the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders are incorporated by reference into Part III.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
PART IV
Item 15.
Exhibits, Financial Statement Schedules
SIGNATURES
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In this Annual Report, the terms “Bio-Techne” or the “Company” refer to Bio-Techne Corporation, Bio-Techne Corporation and its consolidated
subsidiaries, or the consolidated subsidiaries of Bio-Techne Corporation, as the context requires.
FORWARD-LOOKING INFORMATION AND CAUTIONARY STATEMENTS
Certain statements included or incorporated by reference in this Annual Report, in other documents we file with or furnish to the Securities and
Exchange Commission (“SEC”), in our press releases, webcasts, conference calls, materials delivered to shareholders and other communications, are
“forward-looking statements” within the meaning of the U.S. federal securities laws. All statements other than historical factual information are
forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, profit margins, pricing, tax
rates, tax provisions, cash flows, our liquidity position or other projected financial measures; management’s plans and strategies for future operations,
including statements relating to anticipated operating performance, cost reductions, new product and service developments, competitive strengths or
market position, acquisitions and the integration thereof, strategic opportunities, dividends and executive compensation; growth, declines and other
trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; future regulatory approvals and the timing and
conditionality thereof; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; future foreign currency
exchange rates and fluctuations in those rates; the potential or anticipated direct or indirect impact of COVID-19 on our business, results of operations
and/or financial condition; general economic and capital markets conditions; the anticipated timing of any of the foregoing; assumptions underlying any
of the foregoing; and any other statements that address events or developments that Bio-Techne intends or believes will or may occur in the future.
Terminology such as “believe,” “anticipate,” “should,” “could,” “intend,” “will,” “plan,” “expect,” “estimate,” “project,” “target,” “may,” “possible,”
“potential,” “forecast” and “positioned” and similar references to future periods are intended to identify forward-looking statements, although not all
forward-looking statements are accompanied by such words. Forward-looking statements are based on assumptions and assessments made by our
management in light of their experience and perceptions of historical trends, current conditions, expected future developments and other factors they
believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the risks and
uncertainties set forth below and under “Item 1A. Risk Factors” in this Annual Report.
Forward-looking statements are not guaranties of future performance and actual results may differ materially from the results, developments and
business decisions contemplated by our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking
statements. Forward-looking statements speak only as of the date of the report, document, press release, webcast, call, materials or other communication
in which they are made. Except to the extent required by applicable law, we do not assume any obligation to update or revise any forward-looking
statement, whether as a result of new information, future events and developments or otherwise.
Investment in our securities involves risk and uncertainty and you should carefully consider all information in this Annual Report on Form 10-K prior to
making an investment decision regarding our securities. Below is a summary of material risks and uncertainties we face, which are discussed more fully
in “Item 1A. Risk Factors”:
Economic and Industry
● Conditions in the global economy, the particular markets we serve and the financial markets, whether brought about by material global
crises or other factors, may adversely affect our business and financial results.
● International political, compliance and business factors, including the military conflict in Ukraine and the United Kingdom’s withdrawal
from the European Union, can negatively impact our operations and financial results.
● The healthcare and life sciences industries that we serve face constant pressures and changes in an effort to reduce healthcare costs or
increase their predictability, all of which may adversely affect our business and financial results.
3 Acquisition and Investment Risks
● Our inability to complete acquisitions at our historical rate and at appropriate prices, and to make appropriate investments that support our
long-term strategy, could negatively impact our growth rate and stock price.
● Our acquisition of businesses, investments, joint ventures and other strategic relationships, if not properly implemented or integrated, could
negatively impact our business and financial results.
● We may be required to record a significant charge to earnings if our goodwill and other amortizable intangible assets or other investments
become impaired, which could negatively impact our financial results or stock price.
Strategic and Operational Risks
● Our success will be dependent on recruiting and retaining highly qualified and diverse personnel and creating and maintaining a culture
that successfully integrates the employees joining through acquisitions.
● Our growth depends in part on the timely development and commercialization of new and enhanced products and services that meet our
customers’ needs. Our growth can also be negatively impacted if our customers do not grow as anticipated.
● We face intense competition, and if we are unable to compete effectively, we may experience decreased demand and decreased market
share or need to reduce prices to remain competitive.
● A significant disruption in, or breach of security of, our information technology systems or data, or violation of data privacy laws, could
result in damage to our reputation, data integrity, and/or subject us to costs, fines, or lawsuits under data privacy or other laws or
contractual requirements.
● If we suffer a loss to our supply chains, distribution systems or information technology systems due to catastrophe or other events, our
operations could be seriously harmed.
● The manufacture of many of our products is a complex process, and if we directly or indirectly encounter problems manufacturing
products, our business and financial results could suffer.
● If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market
conditions or customer demand, our business and financial results may suffer. In addition, our reliance upon sole or limited sources of
supply for certain materials, components and services can cause production interruptions, delays and inefficiencies.
● The Company relies heavily on internal manufacturing and related operations to produce, package and distribute its products which, if
disrupted, could materially impair our business operations. Our business could be adversely affected by disruptions at our sites.
● Climate change, or legal or regulatory measures to address climate change, may negatively affect us.
● Defects, unanticipated use of or inadequate disclosure with respect to our products, or allegations thereof, can adversely affect our business
and financial results.
● Because we rely heavily on third-party package-delivery services, a significant disruption in these services or significant increases in prices
may disrupt our ability to ship products, increase our costs and lower our profitability.
4 Intellectual Property Risks
● We are dependent on maintaining our intellectual property rights. If we are unable to adequately protect our intellectual property, or if third
parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights.
● We may be involved in disputes to determine the scope, coverage and validity of others’ proprietary rights, or to defend against third-party
claims of intellectual property infringement, any of which could be time-intensive and costly and may adversely impact our business.
Financial and Tax Risks
● We have entered into and drawn on a revolving credit facility, and we may incur additional debt in the future. The burden of this additional
debt could adversely affect us, make us more vulnerable to adverse economic or industry conditions, and prevent us from funding our
expansion strategy.
● Our business and financial results can be adversely affected by foreign currency exchange rates, changes in our tax rates, and tax liabilities
and assessments (including as a result of changes in tax laws).
● Dividends on our common stock could be reduced or eliminated in the future.
Legal, Regulatory, Compliance and Reputational Risks
● Our business is subject to extensive regulation; failure to comply with these regulations could adversely affect our business and financial
results.
● Significant developments or changes in U.S. laws or policies, including changes in U.S. trade policies and tariffs and the reaction of other
countries thereto, can have an adverse effect on our business and financial results.
● Our business and financial results can be impaired by improper conduct of any of our employees, agents, or business partners.
● Certain of our businesses are subject to extensive regulation by the U.S. FDA and by comparable agencies of other countries, as well as
laws regulating fraud and abuse in the healthcare industry and the privacy and security of health information. Failure to comply with those
regulations could adversely affect our business and financial results.
● Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to the Company’s reputation
and have a material adverse effect upon the Company’s business, a risk that has been elevated with recent acquisitions that use protected
health information and utilize healthcare providers for laboratory testing services.
5 PART I
ITEM 1. BUSINESS
OVERVIEW
Bio-Techne and its subsidiaries, collectively doing business as Bio-Techne Corporation (Bio-Techne, we, our, us or the Company), develop,
manufacture and sell life science reagents, instruments and services for the research, diagnostics and bioprocessing markets worldwide. With our broad
product portfolio and application expertise, we sell integral components of scientific investigations into biological processes and molecular diagnostics,
revealing the nature, diagnosis, etiology and progression of specific diseases. Our products aid in drug discovery efforts and provide the means for
accurate clinical tests and diagnoses.
We manage the business in two operating segments – our Protein Sciences segment and our Diagnostics and Genomics segment. Our Protein Sciences
segment is a leading developer and manufacturer of high-quality biological reagents used in all aspects of life science research, diagnostics and cell and
gene therapy. This segment also includes proteomic analytical tools, both manual and automated, that offer researchers and pharmaceutical
manufacturers efficient and streamlined options for automated western blot and multiplexed ELISA workflow. Our Diagnostics and Genomics segment
develops and manufactures diagnostic products, including controls, calibrators, and diagnostic assays for the regulated diagnostics market, exosome-
based molecular diagnostic assays, advanced tissue-based in-situ hybridization assays for spatial genomic and tissue biopsy analysis, and genetic and
oncology kits for research and clinical applications.
We are a Minnesota corporation with our global headquarters in Minneapolis, Minnesota. We were founded in 1976 as Research and Diagnostic
Systems, Inc. We became a publicly traded company in 1985 through a merger with Techne Corporation, now Bio-Techne Corporation. Our common
stock is listed on the NASDAQ under the symbol “TECH.” We operate globally, with offices in many locations throughout North America, Europe and
Asia. Today, our product lines include hundreds of thousands of diverse products, most of which we manufacture ourselves in multiple locations in
North America, as well as a location each in the U.K. and China.
Our historical focus was on providing high quality proteins, antibodies and immunoassays to the life science research market and hematology controls to
the diagnostics market. Since 2013, we have been implementing a disciplined strategy to accelerate growth in part by acquiring businesses and product
portfolios that leveraged and diversified our existing product lines, filled portfolio gaps with differentiated high growth businesses, and expanded our
geographic scope. From fiscal years 2013 through 2023 we have acquired, agreed to acquire, or made investments in nineteen companies that have
expanded the product offerings and geographic footprint of both operating segments, including the acquisition of Namocell, Inc. at the beginning of
fiscal year 2023, and entering into an agreement to acquire Lunaphore SA. at the end of the year. We also completed a 19.9% investment in Wilson Wolf
Corporation (“Wilson Wolf”) this year, and will acquire the remaining ownership in Wilson Wolf by the end of calendar year 2027, if not earlier due to
its achievement of revenue or earnings before interest, taxes, depreciation, and amortization (“EBITDA”) targets. Recognizing the importance of an
integrated, global approach to meeting our mission and accomplishing our strategies, we have maintained many of the brands of the companies we have
acquired, but unified under a single global brand -- Bio-Techne.
We are committed to providing the life sciences community with innovative, high-quality scientific tools that allow our customers to make extraordinary
discoveries and treat and diagnose diseases. We intend to build on Bio-Techne’s past accomplishments, high product quality reputation and sound
financial position by executing strategies that position us to serve as the standard for biological content in the research market, and to leverage that
leadership position to enter the diagnostics and other adjacent markets. Our strategies, which have been consistent for at least the last several years,
include:
Continued innovation in core products. Through collaborations with key opinion leaders, participation in scientific discussions and
societies, and leveraging our internal talent we expect to be able to convert our continued significant investment in our research and
development activities to be first-to-market with quality products that are at the leading edge of life science researchers’ needs.
6 Market and geographic expansion. We will continue to expand our sales staff and distribution channels globally in order to increase our
global presence and make it easier for customers to transact with us. We will also leverage our existing portfolio to expand our product
offerings into novel research fields and further into diagnostics and therapeutics markets.
Culture development and talent recruitment and retention. As we continue to grow both organically and through acquisition, we are
intentionally fostering an “EPIC” culture based on the ideals of Empowerment, Passion, Innovation and Collaboration. We strive to
recruit, train and retain the most talented staff, who share these EPIC ideals to effectively implement our global strategies.
Targeted acquisitions and investments. We will continue to leverage our strong balance sheet to gain access to new and differentiated
technologies and products that improve our competitiveness in the current market, meet customers’ expanding workflow needs and allow
us to enter adjacent markets.
PROTEIN SCIENCES SEGMENT
Protein Sciences Segment Products and Markets
The Protein Sciences segment is the larger of our two segments, representing about 74% of our net sales in fiscal 2023. It is comprised of two divisions
with complementary product offerings serving many of the same customers – the Reagent Solutions division and the Analytical Solutions division.
The Reagent Solutions division consists of specialized proteins, such as cytokines and growth factors, antibodies, small molecules, tissue culture sera
and cell selection technologies traditionally used by researchers to further their life science experimental activities and by companies developing next
generation diagnostics and therapeutics, including companies developing cell- and gene-based therapeutics. We believe we are the world leader in
providing high quality proteins, both for research use and under current Good Manufacturing Practices, or cGMP. Key product brands include R&D
Systems, Tocris Biosciences and Novus Biologicals. Our combined chemical and biological reagents portfolio provides high quality tools that customers
can use in solving complex biological pathways and glean knowledge that may lead to a more complete understanding of biological processes, and,
ultimately, to the development of novel therapeutic strategies to address different pathologies. In recent years, we have made several acquisitions and
investments that have expanded our product offerings for the cell and gene therapy market. These include a significant investment in state-of-the art
facilities for production of both proteins and small molecules in large quantities manufactured in accordance with cGMP, as well as a 19.9% investment
in – and eventual acquisition of – Wilson Wolf, which is a leading provider of cell culture devices for cell therapy. Through a collaborative marketing
venture with Wilson Wolf and another company, we have leveraged the products we have or are developing to provide a more complete offering for the
cell and gene therapy market.
The Analytical Solutions division includes manual and automated protein analysis instruments and immunoassays that are used in quantifying proteins
in a variety of biological fluids. Products in this division include traditional manual plate-based immunoassays, fully automated multiplex
immunoassays on various instrument platforms, and automated western blotting and isoelectric focusing analysis of complex protein samples. Key
product brands include R&D Systems and ProteinSimple. A number of our products have been demonstrated to have the potential to serve as predictive
biomarkers and therapeutic targets for a variety of human diseases and conditions including cancer, autoimmunity, diabetes, hypertension, obesity,
inflammation, neurological disorders, and kidney failure. Immunoassays can also be useful in clinical diagnostics. In fact, we have received Food and
Drug Administration (FDA) marketing clearance for a few of our immunoassays for use as in vitro diagnostic devices. In addition, in the first quarter of
fiscal 2023, we closed on the acquisition of Namocell, Inc., leading provider of simple single cell sorting and dispensing platforms that are gentle to
cells and therefore preserve cell viability and integrity.
Protein Sciences Segment Customers and Distribution Methods
Our customers for this segment include researchers in academia and industry (chiefly pharmaceutical and biotech companies as well as contract research
organizations). This segment also sells to diagnostic/companion diagnostic and therapeutic customers, especially customers engaged in the development
of cell- and gene-based therapies. Our biologics line of products in the Analytical Solutions division is used chiefly by production and quality control
departments at
7 biotech and pharmaceutical companies. We sell our products directly to customers who are primarily located in North America, Europe and China, as
well as through a distribution agreement with Thermo Fisher Scientific. We also sell through third party distributors in China, Japan, certain eastern
European countries and the rest of the world. Our sales are widely distributed, and no single end-user customer accounted for more than 10% of the
Protein Sciences segment’s net sales during fiscal 2023, 2022, or 2021.
DIAGNOSTICS AND GENOMICS SEGMENT
The Diagnostics and Genomics segment, representing about 26% of our net revenues in fiscal 2023, includes three divisions and is focused primarily on
the diagnostics market and includes spatial biology, liquid biopsy, molecular diagnostics kits and products, and diagnostics reagents.
Diagnostics and Genomics Segment Products
The Spatial Biology division products sold under the Advanced Cell Diagnostics, or ACD, brand, are novel in-situ hybridization (ISH) assays for
transcriptome, DNA copy, and structural variation analysis within intact cells, providing highly sensitive and specific spatial information at single cell
resolution. Since these products preserve spatial context, they are particularly useful for complex tissue profiling.
The Molecular Diagnostics division markets and sells products and services under the Exosome Diagnostics and Asuragen brands. The Exosome
Diagnostics brand is based on exosome-based liquid biopsy techniques that analyze genes or their transcripts. It includes the ExoDx Prostate test, which
is a urine-based assay for early detection of high-grade prostate cancer used as an aid in deciding the need for biopsy and offered by Exosome
Diagnostics as a lab-developed test, as well as the ExoTRU kidney transplant rejection test, which we have licensed exclusively to Thermo Fisher
Scientific. We also sell products for genetic carrier screening, oncology diagnostics, molecular controls, and research under the Asuragen brand.
The Diagnostic Reagents division consists of regulated products traditionally used as calibrators and controls in the clinical setting. Also included are
instrument and process control products for hematology, blood chemistry, blood gases, coagulation controls and reagents used in various diagnostic
applications. We often manufacture these reagents on a custom basis, tailored to a customer’s specific diagnostic assay technology. We supply these
reagents in various formats including liquid, frozen, or in lyophilized form. Most of these products are sold on an Original Equipment Manufacturer
(OEM) basis to instrument manufacturers, with most products being FDA-cleared.
Diagnostics and Genomics Segment Customers and Distribution Methods
The customers for the Spatial Biology division include researchers in academia as well as investigators in pharmaceutical and biotech companies. We
sell our products directly to those customers who are primarily located in North America, Europe, and China, and through distributors elsewhere. In
addition to being useful research tools, our DNA and RNA in situ hybridization (ISH) assays have diagnostics applications as well, and several are
cleared or currently under review by the FDA in partnership with diagnostics instrument manufacturers and pharmaceutical companies.
In the United States, we offer the ExosomeDx Prostate test to physicians using our lab-developed non-invasive urine-based assay for prostate cancer
detection. Our diagnostic laboratory is certified under and regulated by the State of Massachusetts pursuant to the Clinical Laboratory Improvement
Amendments, or CLIA. We reach our customers through physicians prescribing such tests for their patients. This test is also available in Europe as a
CE-marked product. The Asuragen-branded products are sold primarily to laboratories for use in lab-developed tests or in kit form as regulated
diagnostic tests.
The majority of Diagnostic Reagents Division’s sales are through OEM agreements, but we sell some of our diagnostic reagent products directly to
customers and, in Europe and Asia, also through distributors.
No customer accounted for 10% or more of the reporting segment’s consolidated net sales during fiscal years 2023, 2022 or 2021.
8 MANUFACTURING AND MATERIALS
Our manufacturing operations use a wide variety of raw materials and components, including electronic components, chemicals and biological
materials. No single supplier is material, although for some components that require particular specifications or regulatory or other qualifications there
may be a single supplier or a limited number of suppliers that can readily provide such components. We utilize a number of techniques to address
potential disruption in and other risks relating to our supply chain, which in certain cases includes the use of safety stock, alternative materials, and
qualification of multiple supply sources.
The majority of our products are shipped within one day of receipt of the customers’ orders, other than our instruments and related cartridges, which are
typically shipped within one to two weeks of receipt of an order. There was no significant backlog of orders for our products as of the date of this
Annual Report on Form 10-K or as of a comparable date for fiscal 2023. For additional discussion of risks relating to supply chain and manufacturing,
refer to “Item 1A. Risk Factors.”
COMPETITION
Although our segments both generally operate in highly competitive markets, it is difficult to determine our competitive position, either in the aggregate
or by segment, since none of our competitors offer all of the same product and service lines or serve all of the same markets as the Company, or any of
its segments, does. Because of the range of the products and services we sell, we encounter a wide variety of competitors, including a number of large,
global companies or divisions of such companies with substantial capabilities and resources, as well a number of smaller, niche competitors with
specialized product offerings. We have seen increased competition in a number of our markets as a result of the entry of new companies into certain
markets, the entry of competitors based in low-cost manufacturing locations, and increasing consolidation in particular markets. The number of
competitors varies by product line. Key competitive factors vary among the Company’s businesses, but include the specific factors noted above with
respect to each particular business and typically also include price, quality and safety, performance, delivery speed, application expertise, service and
support, technology and innovation, distribution network, breadth of product, service and software offerings, and brand name recognition. We believe
our competitive position is strong due to the unique aspects of many of our products and our product quality. For a discussion of risks related to
competition, refer to “Item 1A. Risk Factors.”
SEASONALITY OF BUSINESS
Bio-Techne believes there is some seasonality as a result of vacation and academic schedules of its worldwide customer base, particularly for the Protein
Sciences segment.
There is also some seasonality for the ExosomeDx Prostate test, as patients tend to avoid scheduling medical appointments during the summer and other
holidays. A majority of Diagnostics Reagents division products are manufactured in large bulk lots and sold on a schedule set by the customer.
Consequently, sales for that division can be unpredictable, and not necessarily based on seasonality. As a result, we can experience material and
sometimes unpredictable fluctuations in our revenue from the Diagnostics and Genomics segment.
GOVERNMENT CONTRACTS
Although the Company transacts business with various government entities, no government contract is of such magnitude that renegotiation of profits or
termination of the contract at the election of the government entity would have a material adverse effect on the Company’s financial results. As a party
to these contracts, Bio-Techne does have to comply with certain regulations that apply to companies doing business with governments. For a discussion
of risks related to government contracting requirements, see “Item 1A. Risk Factors.”
NEW PRODUCTS AND RESEARCH AND DEVELOPMENT
We believe that our future success depends, to a large extent, on our ability to keep pace with changing technologies and market needs. Bio-Techne is
engaged in continuous research and development in all of our major product lines. We also carry out research to develop new products that build upon
and expand the technologies we acquire through our acquisition strategy. In fiscal 2023, we introduced over 1,600 new products. While this is an area
of focus for the Company, there is
9 no assurance that any of the products in the research and development phases can be successfully completed or, if completed, can be successfully
introduced into the marketplace.
HUMAN CAPITAL
Through its subsidiaries, Bio-Techne employed approximately 3,050 full-time and part-time employees as of June 30, 2023, of whom approximately
2,400 were employed in the United States and approximately 650 outside the United States. None of the United States employees are unionized. Outside
the United States, the Company has government-mandated collective bargaining arrangements or work councils in certain countries.
Bio-Techne is committed to attracting, developing, engaging, and retaining the best people possible from around the world to sustain and grow our
leadership position in life sciences tools and diagnostics. We strive to create an employee experience that allows each to achieve their life’s best work.
This is demonstrated by leading with our EPIC values of Empowerment, Passion, Innovation and Collaboration. We continuously build on our people-
first culture, led by uncompromising integrity, hosting a place of belonging, granting access to innovation and respecting human rights around the globe.
Our talent management strategy spans multiple key dimensions, including the following:
Culture and Governance
Our four EPIC values of Empowerment, Passion, Innovation and Collaboration are the backbone for the way we approach the leadership and direction
of our work force. Employees are empowered to realize their potential. Our culture supports and encourages a collaborative approach to working with
each other and with our customers. We encourage innovation to continually improve our products, services and processes, and our passions for science
and the missions of our customers are our guiding lights.
Our EPIC values are embedded in our culture and practices. For example, our performance management system and annual review processes
incorporate our EPIC values. Each employee is measured against the behaviors and attributes that support those values. To further amplify our desired
behaviors, we have an annual employee recognition program in which we ask for nominations and recognize winning individuals and teams across our
business who have best demonstrated our EPIC values.
Bio-Techne’s Board of Directors reviews management succession planning at least annually, and its Compensation Committee reviews the Company’s
talent management strategy periodically in connection with significant initiatives and acquisitions, as well as part of its oversight of our executive and
equity compensation programs. At the management level, our Chief Human Resources Officer, who reports directly to our President and CEO, is
responsible for the development and execution of the Company’s talent management strategy.
Engagement and Belonging
Our engagement strategy focuses on developing the best workplace and best people leaders to meet our employees’ needs. We believe that strong
employee engagement helps enable higher retention and better business performance. We assess our engagement performance through regular
consultation with our managers. We also engage more formally via an annual engagement survey that assesses our employees’ overall experience. In
2023, 62% of our global workforce participated, and 77% of those who responded provided favorable feedback. While these responses were quite
positive, our management used the responses to inform and shape our future employee-focused initiatives. These initiatives in the past have resulted in
changes in programs and policies, including expansion of our management and leadership development programs, addition of a parental leave program,
expansion of our incentive programs to include annual cash bonuses to all employees, introduction of flexible working, addition of an internal
communications function, leadership engagement focused on transparency and stronger feedback follow-up, and expansion of the breadth and resources
of our Employee Resource Groups (ERGs). In fiscal year 2023, we empowered work/life integration through hybrid work models wherever feasible,
continued to cultivate belonging and inclusion through deepened investment of resources to our ERGs, and paved the path for career growth through the
personalized development and implementation of individual action plans.
10 We believe a diverse workforce and culture of belonging is central to drive innovation, fuel growth and help ensure our technologies and products
effectively serve a global customer base. The Company’s executive-sponsored Belonging initiative is focused on providing a welcoming working
environment for all employees, continued education, broadening our candidate pools, and implementing and sustaining programs. One of the
centerpieces of our talent development strategy is our ERGs, coordinated under the guidance of our executive-sponsored Employee Resource Group
Council; they offer mentorship, support and engagement to help our employees, including those from underrepresented groups, succeed and thrive. As
of June 30, 2023, we had 10 ERGs operating globally.
As of June 30, 2023, 49% of our total employee population was female, and 45% of our managerial employees were female. In the United States, 38%
of our total employee population identified as nonwhite and 26% of our managerial employees identified as nonwhite.
Recruitment and Retention
Bio-Techne believes that sustaining its profitable growth will require a continued focus on recruiting and retaining top, diverse talent. We engage in a
variety of recruiting strategies intended to locate and identify qualified candidates and create a talent pipeline. The Company offers competitive pay and
benefits, from flexible work to financial planning resources to an employee stock purchase plan. Last year, we bolstered our recruitment and retention
efforts by expanding eligibility to receive stock options deeper into the organization. In FY23, we further expanded these efforts by expanding our
Long-Term Incentive program strategy to include a combination of stock options and restricted stock units, instead of exclusively stock options. Bio-
Techne continues to offer a referral bonus with the understanding that this is one of our most successful sourcing methods.
In addition to pay and benefits, Bio-Techne believes that the ability to retain employees requires an environment where they can work productively and
where there are opportunities to grow and advance. The Company therefore seeks to cultivate a culture of empowerment and collaboration, where
employees can observe the impact of their efforts, and where they see opportunities both laterally and vertically. We believe that our focus and
investment in recruitment and retention contributed to our inclusion on the Forbes list in fiscal 2022 as one of America’s Best Midsize Employers as
well as one of the Best Employers for Diversity.
The last fiscal year continued to see considerable employee mobility across all industries, including the biotechnology industry, but we nonetheless
significantly reduced our attrition rate to maintain durable stability across our enterprise. We believe that Bio-Techne’s sustained efforts on recruitment
and retention will fortify our resilience and ability to remain productive in the face of increased employee mobility and economic challenges.
Talent Development and Learning and Development
Bio-Techne invests in people development in the belief that growing and promoting employees from within the Company creates a more sustainable
organization. High potential employees are identified through our annual talent review strategy, as well as through leadership development programs
designed to cultivate future leaders. Employees identified as high potential are elevated to the attention of senior management for consideration for
additional development, growth opportunities, and career advancement.
Our global Learning and Development program delivers a wide range of initiatives including a validated suite of compliance training, and soft,
technical, business, interpersonal and career skills. Bio-Techne also encourages and supports employees who wish to supplement their growth through
external training and education. As a company that regularly acquires other businesses, we believe it is important for employees to be trained in the
skills and mindsets that enable them to respond positively to change. This initiative allows individuals to deal with change easily and reduces the need to
run large scale change management programs.
Well-Being and Safety
The Company is committed to protecting the physical health and psychological well-being of our employees by providing a safe work environment. We
actively monitor and adjust our crisis management plan and response protocol to protect our employees. Bio-Techne trains all employees on
foundational safety principles and requires more rigorous safety and hazard awareness training where appropriate based on function, role, or team. At
Bio-Techne, all employees are empowered and
11 encouraged to maintain and create a safe workplace. In addition, we provide internal and external resources to provide for the psychological and
emotional security of employees, including employee resource programs, mental health benefit coverage, and flexible work for many roles.
As fiscal year 2023 finally saw the end of the COVID-19 pandemic, the Company carefully managed all employees’ return to their worksites, permitting
hybrid work schedules wherever feasible, and prioritizing a safe workplace.
Community
The Company believes in giving back and in supporting the local communities in which we live and work. The Company and its employees donate
financially and by giving their time and energy. Most sites or departments engage in local charitable causes and activities. In some of our sites,
employees are encouraged to give through regular payroll deductions and through the annual campaign week where employee contributions are matched
by the Company. Some charitable causes are identified and promoted by our ERGs. In addition, United States employees receive a paid day off to
participate in local opportunities to give back to the community as part of our volunteer time off benefit.
INTELLECTUAL PROPERTY
Our success depends in part upon our ability to protect our core technologies and intellectual property. To accomplish this, we rely on a combination of
intellectual property rights, including patents, trade secrets and trademarks, as well as customary contractual protections in our terms and conditions and
other sales-related documentation.
As of June 30, 2023, we had rights to approximately 490 granted patents and approximately 290 pending patent applications. Products in the Analytical
Solutions and the Spatial Biology divisions are protected primarily through pending patent applications and issued patents. In addition, certain of our
products are covered by licenses from third parties to supplement our own patent portfolio. Patent protection, if granted, generally has a life of 20 years
from the date of the patent application or patent grant. We cannot provide assurance that any of our pending patent applications will result in the grant of
a patent, whether the examination process will require us to narrow our claims, and whether our claims will provide adequate coverage of our
competitors’ products or services.
In addition to pursuing patents on our products, we also preserve much of our innovation as trade secrets, particularly in the Reagent Solutions division
of our Protein Sciences segment. Where appropriate, we use trademarks or registered trademarks in connection with our products. We have taken steps
to protect our intellectual property and proprietary technology, in part by entering into confidentiality agreements and intellectual property assignment
agreements with our employees, consultants, corporate partners and, when needed, our advisors. See the description of risks associated with the
Company’s intellectual property in “Item 1A. Risk Factors.”
We can give no assurance that Bio-Techne’s products do not infringe upon patents or proprietary rights owned or claimed by others. Bio-Techne has not
conducted a patent infringement study for each of its products. Where we have been contacted by patent holders with certain intellectual property rights,
Bio-Techne typically has entered into licensing agreements with patent holders under which it has the exclusive and/or non-exclusive right to use
patented technology as well as the right to manufacture and sell certain patented products to the research and/or diagnostics markets.
All trademarks, trade names, product names, graphics, and logos of Bio-Techne contained herein are trademarks and registered trademarks of Bio-
Techne or its subsidiaries, as applicable, in the United States and/or other countries. Solely for convenience, we may refer to trademarks in this Annual
Report on Form 10-K without the ™ or ® symbols. Such references are not intended to indicate that we will not assert our full rights to our trademarks.
LAWS AND REGULATIONS
Our operations, and some of the products we offer, are subject to a number of complex laws and regulations governing the production, marketing,
handling, transportation, and distribution of our products and services. The following sections describe certain significant regulations pertinent to the
Company. These are not the only laws and regulations applicable to the Company’s business. For a description of risks related to laws and regulations to
which we are subject, refer to “Item 1A. Risk Factors.”
12
Medical Device Regulations
A number of our products are classified as medical devices and are subject to restrictions under domestic and foreign laws, rules, regulations, self-
regulatory codes and orders, including but not limited to the U.S. Food, Drug and Cosmetic Act (the “FDCA”). The FDCA requires these products,
when sold in the United States, to be safe and effective for their intended uses and to comply with the regulations administered by the U.S. Food and
Drug Administration (“FDA”). The FDA regulates the design, development, testing, manufacture, advertising, labeling, packaging, marketing,
distribution, import and export and record keeping for such products. Many medical device products are also regulated by comparable agencies in non-
U.S. countries in which they are produced or sold.
Any medical devices we manufacture and distribute are subject to pervasive and continuing regulation by the FDA and certain state and non-U.S.
agencies. As a medical device manufacturer, our manufacturing facilities are subject to inspection on a routine basis by the FDA. We are required to
adhere to the Current Good Manufacturing Practices (“cGMP”) requirements, as set forth in the Quality Systems Regulation (“QSR”), which require
manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures
during all phases of the design and manufacturing process.
We must also comply with post-market surveillance regulations, including medical device reporting (“MDR”), requirements which require that we
review and report to the FDA any incident in which our products may have caused or contributed to a death or serious injury. We must also report any
incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury it if were to recur.
Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical
devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “off-label” promotion. The FDA
and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
In the European Union (“EU”), our products are subject to the medical device laws of the various member states, which are currently based on a
Directive of the European Commission. Additionally, the EU has adopted the In Vitro Diagnostic Regulation (the “EU IVDR”), which imposes stricter
requirements for the marketing and sale of in vitro diagnostic medical devices, including in the area of clinical evaluation requirements, quality systems
and post-market surveillance. Manufacturers of in vitro diagnostics medical devices that have been marketed and sold under the prior regulatory regime
now have to comply with some of the new EU IVDR requirements, while the effective date of other requirements have been delayed. Complying
with EU IVDR may require material modifications to our quality management systems, additional resources in certain functions, updates to technical
files and additional clinical data in some cases, among other changes.
One of our products under our Exosome Diagnostics brand is offered as a test by a certified laboratory under CLIA. Our Asuragen business also
maintains a CLIA certification. Consequently, we must comply with state licensing regulations applicable to laboratories regulated under CLIA,
governing laboratory practices and procedures.
Other Healthcare Laws
Several of the products sold in our Diagnostics and Genomics segment are subject to various health care related laws regulating fraud and abuse,
research and development, pricing and sales and marketing practices, and the privacy and security of health information, including, among others:
● U.S. federal regulations regarding quality and cost by the U.S. Department of Health and Human Services (“HHS”), including the Centers
for Medicare & Medicaid Services (“CMS”), as well as comparable state and non-U.S. agencies responsible for reimbursement and
regulation of healthcare goods and services, including laws and regulations related to kickbacks, false claims, self-referrals and healthcare
fraud.
● U.S. Federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing
remuneration (including any kickback or bribe), directly or indirectly, in exchange for
13 or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made in
whole or in part under a federal health care program, such as Medicare or Medicaid.
● Comparable laws and regulations similar to, and in some cases more stringent than, the U.S. federal regulations discussed above and below,
including the UK Bribery Act and similar anti-bribery laws.
● The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which prohibits knowingly and willfully (1) executing, or
attempting to execute, a scheme to defraud any health care benefit program, including private payors, or (2) falsifying, concealing or
covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment
for health care benefits, items or services. In addition, HIPAA, as amended by the Health Information Technology for Economic and
Clinical Health Act of 2009, also restricts the use and disclosure of patient identifiable health information, mandates the adoption of
standards relating to the privacy and security of patient identifiable health information and requires the reporting of certain security
breaches with respect to such information.
● The False Claims Act, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be
presented, a false or fraudulent claim for payment by a federal health care program, knowingly makes, uses or causes to be made or used, a
false record or statement material to a false or fraudulent claim, or knowingly makes a false statement to avoid, decrease or conceal an
obligation to pay money to the U.S. federal government.
● The Open Payments Act requires manufacturers of medical devices covered under Medicare to, in certain circumstances, record payments
and other transfers of value to a broad range of healthcare providers and teaching hospitals and to report this data as well as ownership and
investment interests held by the physicians described above and their immediate family members to HHS for subsequent public disclosure,
as well as similar reporting requirements in some states and in other countries.
For a discussion of risks related to regulation by the FDA and comparable agencies of other countries, and the other regulatory regimes referenced
above, please refer to section entitled “Item 1A. Risk Factors.”
Data Privacy and Security Laws
As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a
result of having access to and processing confidential, personal and/or sensitive data in the course of our business. In addition to the U.S. HIPAA
privacy and security rules mentioned above, which impact some parts of our business, individual states also regulate data breach and security
requirements, and multiple governmental bodies assert authority over aspects of the protection of personal privacy. In particular, a broad privacy law in
California, the California Consumer Privacy Act (“CCPA”), came into effect in January 2020. The CCPA has some of the same features as the GDPR
(discussed below) and has already prompted several other states to follow with similar laws. The EU General Data Protection Regulation that became
effective in May 2018 (“GDPR”) has imposed significantly stricter requirements in how we collect, transmit, process, and retain personal data,
including, among other things, in certain circumstances a requirement for almost immediate notice of data breaches to supervisory authorities and
prompt notice to data subjects with significant fines for non-compliance. Several other countries in which we do business have passed, and other
countries are considering passing, laws that require personal data relating to their citizens to be maintained on local servers and impose additional data
transfer restrictions. For a discussion of risks related to improper disclosure of private information particularly as a result of cyber security incidents,
please refer to section entitled “Item 1A. Risk Factors.”
Environmental Health and Safety Laws
We are also subject to various environmental health and safety laws and regulations both within and outside the U.S. Like other companies in our
industry, our manufacturing and research activities involve the use and transportation of substances regulated under environmental health and safety
laws including those relating to the transportation of hazardous materials.
Other Laws and Regulations Governing Our Sales, Marketing and Shipping Activities
We are subject to the U.S. Foreign Corrupt Practices Act and various other similar anti-corruption and anti-bribery acts, which are particularly relevant
to our operations in countries where the customers are government entities or are controlled
14 by government officials. Both directly and indirectly through our distributors, we must comply with such laws when interacting with those entities.
As Bio-Techne’s businesses also include export and import activities, we are subject to pertinent laws enforced by the U.S. Departments of Commerce,
State and Treasury. Other nations’ governments have implemented similar export/import control and economic sanction regulations, which may affect
the Company’s operations or transactions subject to their jurisdictions.
In addition, under U.S. laws and regulations, U.S. companies and their subsidiaries and affiliates outside the United States are prohibited from
participating or agreeing to participate in unsanctioned foreign boycotts in connection with certain business activities, including the sale, purchase,
transfer, shipping or financing of goods or services within the United States or between the United States and countries outside of the United States. If
we, or certain third parties through which we sell or provide goods or services, violate anti-boycott laws and regulations, we may be subject to civil or
criminal enforcement action and varying degrees of liability.
We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government
contracts could harm our business by a reduction in revenue associated with these customers. We have agreements relating to the sale of our products to
government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. We
are also subject to investigation for compliance with the regulations governing government contracts. A failure to comply with these regulations could
result in suspension of these contracts, criminal, civil and administrative penalties or debarment.
For a discussion of risks related to the above-referenced regulations, particularly with respect to our international operations, please refer to section
entitled “Item 1A. Risk Factors.”
INVESTOR INFORMATION
We are subject to the information requirements of the Securities Exchange Act of 1934 (the Exchange Act). Therefore, we file periodic reports, proxy
statements, and other information with the Securities and Exchange Commission (SEC). The SEC maintains an internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information regarding issuers that file electronically.
Financial and other information about us is available on our web site (https://investors.bio-techne.com/). We make available on our web site copies of
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it
to the SEC.
EXECUTIVE OFFICERS OF THE REGISTRANT
Currently, the names, ages, positions and periods of service of each executive officer of the Company are as follows:
Name
Charles Kummeth
James Hippel
Kim Kelderman
William Geist
Shane Bohnen
Age
63
52
56
53
48
Position
Officer Since
President, Chief Executive Officer and Director
Executive Vice President and Chief Financial Officer
President, Diagnostics and Genomics
President, Protein Sciences
Senior Vice President, General Counsel & Corp. Secretary
2013
2014
2018
2022
2023
Set forth below is information regarding the business experience of each executive officer. There are no family relationships among any of the officers
named, nor is there any arrangement or understanding pursuant to which any person was selected as an officer.
Charles Kummeth has been President and Chief Executive Officer of the Company since April 1, 2013. Prior to joining the Company, he served as an
executive at Thermo Fisher Scientific and in various roles at 3M Corporation.
James Hippel has been Chief Financial Officer of the Company since April 1, 2014. Prior to joining the Company, Mr. Hippel served as Senior Vice
President and Chief Financial Officer for Mirion Technologies, Inc and as Vice
15
President, Finance at Thermo Fisher Scientific, and in financial roles at Honeywell International. Mr. Hippel started his career with KPMG LLP.
Kim Kelderman joined Bio-Techne on April 30, 2018 as President, Diagnostics and Genomics. Prior to Bio-Techne, Mr. Kelderman was an executive at
Thermo Fisher Scientific and a Senior Segment Leader at Becton Dickinson.
William Geist has been President of the Protein Sciences segment since January 3, 2022. Prior to Bio-Techne, Mr. Geist most recently served as Chief
Operating Officer for Quanterix, and before that in senior management roles at Thermo Fisher Scientific and QuantaBiosciences, a QIAGEN company.
Shane Bohnen was promoted to General Counsel and Corporate Secretary on March 3, 2023, and has been an attorney on the Company’s legal team
since July 2019. Prior to joining Bio-Techne, Mr. Bohnen spent 10 years in private practice as a life sciences litigator, followed by seven years as in-
house corporate counsel with an expansive breadth of responsibility and global scope.
16 ITEM 1A. RISK FACTORS
Set forth below are risks and uncertainties we believe are material to our investors. You should refer to the explanation of the qualifications and
limitations on forward-looking statements in the section titled Information Relating to Forward-Looking Statements at the beginning of this Annual
Report on Form 10-K.
Economic and Industry Risks
Conditions in the global economy, the particular markets we serve and the financial markets, whether brought about by material global crises
or other factors, may adversely affect our business and financial results.
Our business is sensitive to global economic conditions. Slower economic growth in the domestic or international markets, inflation, recession, volatility
in the credit and currency markets, high levels of unemployment or underemployment, labor availability constraints, changes or anticipation of potential
changes in government trade, fiscal, tax or monetary policies, government budget dynamics (particularly in the healthcare and scientific research areas),
and other challenges in the global economy have in the past adversely affected, and may in the future adversely affect, the Company and its distributors,
customers, and suppliers. In the past three years, COVID-19 has had, and may continue to have, an adverse impact on the global economy, including as
a result of impacts associated with protective health measures that we, other businesses and governments are taking or might have to take again in the
future to manage the pandemic For example, as the world has grappled with the COVID-19 pandemic, some governments, including the People’s
Republic of China, imposed strict “stay-at-home” orders to manage the pandemic, which has significantly impacted the economy in that country and
our business there. While these restrictions have now lifted, if they were to be imposed again in China or elsewhere, our business could be materially
impacted.
Without limiting the foregoing, we have experienced and/or may in the future experience:
● adverse impacts on customer orders and purchases and unpredictable reductions in demand for many of our products;
● constraints on the movement of our products through the supply chain, which can disrupt our ability to produce or deliver our products;
● adverse impacts on our collections of accounts receivable, including delays in collections and increases in uncollectible receivables, as well
as the risk of excess or obsolete inventory;
● price increases in our raw materials and capital equipment, as well as increasing price competition in our markets;
● adverse impacts on our workforce and/or key employees;
● increased risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual
obligations which, in addition to increasing the risks identified above, could result in preference actions against us; and
● adverse impact to the sizes and growth rates of the markets we serve.
If growth in the global economy or in any of the markets we serve slows for a significant period, if there is significant deterioration in the global
economy or such markets or if improvements in the global economy do not benefit the markets we serve, our business and financial results can be
adversely affected.
International political, compliance and business factors, including the military conflict in Ukraine and the United Kingdom’s withdrawal from
the European Union, can negatively impact our operations and financial results.
We engage in business globally, with approximately 43% of our sales revenue in fiscal 2023 coming from outside the U.S. Changes, potential changes
or uncertainties in social, political, regulatory, and economic conditions or laws and policies
17 governing foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate, or
governing the health care system, can adversely affect our business and financial results. For example, Congress and the U.S. administration have
sought to impose changes to healthcare in the United States, including government negotiation/regulation of drug prices paid by government programs.
Such impacts could negatively impact certain markets we serve, resulting in an adverse impact on our sales revenue.
Political and military conflicts may disrupt our business or negatively impact global economic or business conditions. For example, Russia’s military
invasion of Ukraine, and the response by the US and European countries to that invasion, have caused severe political, humanitarian and economic
crises, not only in Europe but globally. Restrictions on trade, particularly involving certain foods and energy supplies, have increased prices, led to
widespread inflation and otherwise aggravated the economic challenges resulting from the COVID-19 pandemic. While we have not historically had
significant business in either Russia or Ukraine, the broader impact of the conflict could negatively impact our operations and financial results.
One of our strategies is to expand geographically, particularly in China, India and in developing countries, both through distribution and through direct
operations. This subjects us to a number of risks, including international economic, political, and labor conditions; currency fluctuations; tax laws
(including U.S. taxes on foreign subsidiaries); increased financial accounting and reporting burdens and complexities; unexpected changes in, or
impositions of, legislative or regulatory requirements; failure of laws to protect intellectual property rights adequately; inadequate local infrastructure
and difficulties in managing and staffing international operations; delays resulting from difficulty in obtaining export licenses for certain technology;
tariffs, quotas and other trade barriers and restrictions; transportation delays; operating in locations with a higher incidence of corruption and fraudulent
business practices; and other factors beyond our control, including terrorism, war, natural disasters, climate change and diseases. In addition,
geopolitical tensions with these countries could exacerbate these risks.
The application of laws and regulations impacting global transactions is often unclear and may at times conflict. Compliance with these laws and
regulations may involve significant costs or require changes in our business practices that result in reduced revenue and profitability. Non-compliance
could also result in fines, damages, criminal sanctions, prohibited business conduct, and damage to our reputation. We incur additional legal compliance
costs associated with our global operations and could become subject to legal penalties in foreign countries if we do not comply with local laws and
regulations, which may be substantially different from those in the U.S.
We continue to expand our operations in countries with developing economies, where it may be common to engage in business practices that are
prohibited by U.S. regulations applicable to the Company, such as the Foreign Corrupt Practices Act. Although we implement policies and procedures
designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors, and agents, as well as those companies
to which we outsource certain aspects of our business operations, including those based in foreign countries where practices which violate such U.S.
laws may be customary, will comply with our internal policies. Any such non-compliance, even if prohibited by our internal policies, could have an
adverse effect on our business and result in significant fines or penalties.
The healthcare and life sciences industries that we serve face constant pressures and changes in an effort to reduce healthcare costs or increase
their predictability, all of which may adversely affect our business and financial results.
Our Protein Sciences segment products are sold primarily to research scientists at pharmaceutical and biotechnology companies and at university and
government research institutions. In addition to the impacts described above relating to COVID-19, research and development spending by our
customers and the availability of government research funding can fluctuate due to changes in available resources, mergers of pharmaceutical and
biotechnology companies, spending priorities, general economic conditions and institutional and governmental budgetary policies.
18 Our Diagnostics and Genomics segment products are intended primarily for the medical diagnostics market, which relies largely on government
healthcare-related policies and funding. Changes in government reimbursement for certain diagnostic tests or reductions in overall healthcare spending
could negatively impact us directly or our customers and, correspondingly, our sales to them. For example, our Exosome Diagnostics business develops
and sells novel exosome-based diagnostic tests. While we received public payer coverage for certain uses, we are currently seeking expanded coverage
from public payors as well as coverage decisions regarding reimbursement from additional private payers. However, the process and timeline for
obtaining coverage decisions is uncertain and difficult to predict. Further, reimbursement reductions due to changes in policy regarding coverage of tests
or other requirements for payment (such as prior authorization, diagnosis code and other claims edits, or a physician or qualified practitioner’s signature
on test requisitions) may be implemented from time to time. Additionally, the U.S. government’s plans to manage prescription drug prices, as well as its
recently announced intention to regulate lab developed tests, may impact the customers and industries we serve by increasing the cost of
commercializing and/or limiting the profitability of commercialized products. All of these payor actions and changes may have a material adverse effect
on revenue and earnings associated with our diagnostics products.
Acquisition and Investment Risks
Our inability to complete acquisitions at our historical rate and at appropriate prices, and to make appropriate investments that support our
long-term strategy, could negatively impact our growth rate and stock price.
One of our key strategies is growth through acquisition of other businesses and assets. Our ability to grow revenues, earnings and cash flow at or above
our historic rates depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize
anticipated synergies, and to make appropriate investments that support our long-term strategy. We may not be able to consummate acquisitions at rates
similar to the past, which could adversely impact our growth rate and our stock price. Promising acquisitions and investments are difficult to identify
and complete for a number of reasons, including high valuations, competition among prospective buyers or investors, the availability of affordable
funding in the capital markets and the need to satisfy applicable closing conditions and obtain applicable antitrust and other regulatory approvals on
acceptable terms. Changes in accounting or regulatory requirements or instability in the credit markets could also adversely impact our ability to
consummate acquisitions and investments.
Our acquisition of businesses, investments, joint ventures and other strategic relationships, if not properly implemented or integrated, could
negatively impact our business and financial results.
As part of our business strategy, we acquire businesses, make investments and enter into joint ventures and other strategic relationships in the ordinary
course of business, and we also from time to time complete more significant transactions. At the beginning of this fiscal year, we completed the
acquisition of Namocell, a single cell sorting and dispensing platform company. Bio-Techne also obtained a 19.9% ownership stake in Wilson Wolf and
will acquire the remaining ownership no later than the end of calendar year 2027. We have also continued participating in our collaborative marketing
venture, ScaleReady LLC, with Wilson Wolf and another partner, and which addresses the needs of the rapidly expanding cell and gene therapy market.
While we believe these business ventures will advance our business strategies and support our growth plans, we may not be successful in managing or
integrating them into our company. Acquisitions, investments, joint ventures and strategic relationships involve a number of additional financial,
accounting, managerial, operational, legal, compliance and other risks and challenges, including but not limited to the following, any of which could
adversely affect our business and our financial results:
● businesses, technologies, services and products that we acquire or invest in sometimes under-perform relative to our expectations and the price
that we paid, fail to perform in accordance with our anticipated timetable or fail to achieve and/or sustain profitability;
● we from time to time incur or assume debt in connection with our acquisitions and investments, which can result in increased borrowing costs
and interest expense and diminish our future access to the capital markets;
● acquisitions, investments, joint ventures or strategic relationships can cause our financial results to differ from our own or the investment
community’s expectations in any given period, or over the long-term;
19 ● acquisitions, investments, joint ventures or strategic relationships can create demands on our management, operational resources and financial
and internal control systems that we may be unable to effectively address;
● we can experience difficulty in integrating cultures, personnel, operations and financial and other controls and systems and retaining key
employees and customers;
● we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition, investment, joint venture or
strategic relationship;
● we have assumed and may assume unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater
than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s or investee’s activities
and the realization of any of these liabilities or deficiencies can increase our expenses, adversely affect our financial position or cause us to fail
to meet our public financial reporting obligations;
● in connection with acquisitions and joint ventures, we often enter into post-closing financial arrangements such as purchase price adjustments,
earn-out obligations and indemnification obligations, which can have unpredictable financial results; and
● investing in or making loans to early-stage companies often entails a high degree of risk, and we may not always achieve the strategic,
technological, financial or commercial benefits we anticipate; we may lose our investment or fail to recoup our loan; or our investment may be
illiquid for a greater-than-expected period of time.
We may be required to record a significant charge to earnings if our goodwill and other amortizable intangible assets or other investments
become impaired, which could negatively impact our financial results or stock price.
We are required under generally accepted accounting principles to test goodwill for impairment at least annually and to review our goodwill,
amortizable intangible assets, and other assets acquired through merger and acquisition activity for impairment when events or changes in circumstance
indicate the carrying value may not be recoverable. Factors that could lead to impairment of goodwill, amortizable intangible assets, and other assets
acquired via acquisitions include significant adverse changes in the business climate and actual or projected operating results (affecting our company as
a whole or affecting any particular segment) and declines in the financial condition of our business. We may be required in the future to record
additional charges to earnings if our goodwill, amortizable intangible assets or other investments become impaired. Any such charge would adversely
impact our financial results.
In addition, the Company’s expansion strategies include collaborations and investments in joint ventures and companies developing new products
related to the Company’s business. These strategies carry risks that objectives will not be achieved and future earnings will be adversely affected.
Strategic and Operational Risks
Our success will be dependent on recruiting and retaining highly qualified and diverse personnel and creating and maintaining a culture that
successfully integrates the employees joining through acquisitions.
Recruiting and retaining qualified scientific, production, sales and marketing, and management personnel representing diverse backgrounds, experiences
and skill sets are critical to our success. The market for highly skilled workers and leaders in our businesses, particularly in the areas of science and
technology, is extremely competitive. While retention improved in fiscal 2023, a number of our businesses and departments continued to face
recruitment and retention challenges, and faced labor availability constraints and inflationary costs. Our growth by acquisition also creates challenges in
retaining employees. As we integrate past and future acquisitions and evolve our corporate culture to incorporate new workforces, some employees may
not find such integration or cultural changes appealing. Finally, as the geographies in which we operate recover from the recent pandemic and we return
employees who had been working from home back to our sites, we may not be able to retain people who prefer continuing to work from home full time.
The failure to attract and retain such personnel could adversely affect our business.
20 Our growth depends in part on the timely development and commercialization of new and enhanced products and services that meet our
customers’ needs. Our growth can also be negatively impacted if our customers do not grow as anticipated.
We generally sell our products and services in industries that are characterized by rapid technological change, frequent new product introductions and
new market entrants and competitors. If we do not develop innovative new and enhanced products and services on a timely basis, our offerings will
become obsolete over time and our business and financial results will suffer. Our success will depend on several factors, including our ability to:
● correctly identify and/or predict customer needs and preferences;
● allocate our research funding to products with higher growth prospects;
● anticipate and respond to our competitors’ development of new products and technological innovations;
● differentiate our offerings from our competitors’ offerings and avoid our products from becoming commodities;
● innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that may have valuable
applications in the markets we serve;
● obtain adequate intellectual property rights with respect to key technologies;
● successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver
sufficient volumes of new products of appropriate quality on time;
● obtain necessary regulatory approvals of appropriate scope (including with respect to certain diagnostic medical device products by
demonstrating satisfactory clinical results where applicable, as well as achieving third-party reimbursement); and
● stimulate customer demand for and convince customers to adopt new technologies.
If we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and
development of products that do not lead to significant revenue, which would adversely affect our business and financial results. Even when we
successfully innovate and develop new and enhanced products, we often incur substantial costs in doing so, and our profitability may suffer.
We face intense competition, and if we are unable to compete effectively, we may experience decreased demand and decreased market share or
need to reduce prices to remain competitive.
We face intense competition across most of our product lines. Competitors include companies ranging from start-up companies, which may be able to
more quickly respond to customers’ needs, to large multinational companies, which may have greater financial, marketing, operational, and research and
development resources than us. In addition, consolidation trends in the pharmaceutical, biotechnology and diagnostics industries have served to create
fewer customer accounts and to concentrate purchasing decisions for some customers, resulting in increased pricing pressure on us. Moreover,
customers may believe that consolidated businesses are better able to compete as sole source vendors, and therefore prefer to purchase from such
businesses. The entry into the market by manufacturers in countries in Asia and other low-cost manufacturing locations is also creating increased pricing
and competitive pressures, particularly in developing markets. In order to compete effectively, we must retain longstanding relationships with major
customers and continue to grow our business by establishing relationships with new customers, continually developing new products and services to
maintain and expand our brand recognition and leadership position in various product and service categories and penetrating new markets, including
high-growth markets. Our ability to compete can also be impacted by changing customer preferences and requirements (for example increased demand
for more environmentally-friendly products and supplier practices). Our failure to compete effectively and/or pricing pressures resulting from
competition may adversely impact our business and financial results, and our expansion into new markets may result in greater-than-expected risks,
liabilities and expenses.
21 A significant disruption in, or breach of security of, our information technology systems or data, or violation of data privacy laws, could result
in damage to our reputation, data integrity and/or subject us to costs, fines, or lawsuits under data privacy or other laws or contractual
requirements.
The integrity and protection of our own data, and that of our customers and employees, is critical to our business. We rely on information technology
systems, some of which are provided and/or managed by third parties, to process, transmit and store electronic information (including sensitive data
such as confidential business information and personally identifiable data relating to employees, customers, other business partners and patients), and to
manage or support a variety of critical business processes and activities (such as receiving and fulfilling orders, billing, collecting and making payments,
shipping products, providing services and support to customers and fulfilling contractual obligations). These systems, products and services (including
those we acquire through business acquisitions) can be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses,
ransomware, human error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen
events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. Attacks can also
target hardware, software and information installed, stored or transmitted in our products after such products have been purchased and incorporated into
third-party products, facilities or infrastructure. Security breaches of systems provided or enabled by us, regardless of whether the breach is attributable
to a vulnerability in our products or services, or security breaches of third party systems we rely on to process, store or transmit electronic information,
can result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our
employees, partners, customers, patients or suppliers. These attacks, breaches, misappropriations and other disruptions and damage can interrupt our
operations or the operations of our customers and partners, delay production and shipments, result in theft of our and our customers’ intellectual
property and trade secrets, result in disclosure of personally identifiable information, damage customer, patient, business partner and employee
relationships and our reputation and result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and
increased costs for security and remediation, in each case resulting in an adverse effect on our business and financial results.
In addition, our information technology systems require an ongoing commitment of significant resources to maintain and enhance existing systems and
develop or integrate new systems to keep pace with continuing changes in information processing technology, evolving legal and regulatory standards,
evolving customer expectations, changes in the techniques used to obtain unauthorized access to data and information systems, and the information
technology needs associated with our changing products and services. There can be no assurance that we will be able to successfully maintain, enhance
and upgrade our systems as necessary to effectively address these requirements.
If we are unable to maintain reliable information technology systems or appropriate controls with respect to global data privacy and security
requirements and prevent data breaches, we may suffer regulatory consequences in addition to business consequences. As a global organization, we are
subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and
processing confidential, personal and/or sensitive data in the course of our business. For example, in the United States, a small number of our businesses
are subject to HIPAA. Entities that violate HIPAA due to a breach of unsecured patient health information, or that arise from a complaint about privacy
practices or an audit by the HHS, may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and
oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-
compliance. Individual states regulate data breach and security requirements, and multiple governmental bodies assert authority over aspects of the
protection of personal privacy. Most notably, in the last several years, some states, including California, Virginia, Utah, Colorado and Connecticut, have
passed broad privacy legislation that could result in more material impacts as implementing regulations are issued. European laws require us to have an
approved legal mechanism to transfer personal data out of Europe. Failure to comply with the requirements of GDPR and the applicable national data
protection laws of the EU member states may result in fines of up to €20 million or up to 4% of the total worldwide annual turnover of the preceding
financial year, whichever is higher, and other administrative penalties. Several other countries such as China and Russia have passed, and other countries
are considering passing, laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer
restrictions. Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data
privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial results.
22 If we suffer loss to our supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations
could be seriously harmed.
Our supply chains, distribution systems and information technology systems may be subject to catastrophic loss due to fire, flood, earthquake, hurricane,
power shortage or outage, public health crisis (including epidemics and pandemics) and the reaction thereto, war, terrorism, riot or other man-made or
natural disasters, such as the COVID-19 pandemic. If any of these supply chains or systems were to experience a catastrophic loss, it could disrupt our
operations, delay production and shipments, result in defective products or services, diminish demand, damage customer relationships and our
reputation and result in legal exposure and significant repair or replacement expenses. The third-party insurance coverage that we maintain varies from
time to time in both type and amount depending on cost, availability and our decisions regarding risk retention, and may be unavailable or insufficient to
protect us against such losses.
The manufacture of many of our products is a complex process, and if we directly or indirectly encounter problems manufacturing products,
our business and financial results could suffer.
The manufacture of many of our products is a complex process, due in part to strict regulatory requirements for some of our products. Problems can
arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with
reliable sourcing of raw materials or components, natural disasters and environmental factors, and if not discovered before the product is released to
market can result in recalls and product liability exposure. Because of the quality requirements of some of our customers as well as stringent regulations
of the FDA and similar agencies regarding the manufacture of certain of our products, alternative manufacturing or sourcing is not always available on a
timely basis to replace such production capacity. Any of these manufacturing problems could result in significant adverse impacts to our business and
financial results.
If we cannot adjust our manufacturing capacity or the purchases required for our manufacturing activities to reflect changes in market
conditions or customer demand, our business and financial results may suffer. In addition, our reliance upon sole or limited sources of supply
for certain materials, components and services can cause production interruptions, delays and inefficiencies.
We purchase materials, components and equipment from third parties for use in many of our manufacturing operations. Our profitability could be
adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations, including those caused by
seasonality or cyclicality. During a market upturn, suppliers from time to time extend lead times, limit supplies or increase prices. If we cannot purchase
sufficient products at competitive prices and quality and on a timely enough basis to meet increasing demand, we may not be able to satisfy market
demand, product shipments may be delayed, our costs may increase, or we may breach our contractual commitments and incur liabilities. Conversely, in
order to secure supplies for the production of products, we sometimes enter into noncancelable purchase commitments with vendors, which can impact
our ability to adjust our inventory to reflect declining market demands. If demand for our products is less than we expect, we may experience additional
excess and obsolete inventories and be forced to incur additional charges and our business and financial results may suffer.
In addition, some of our businesses purchase certain requirements from sole or limited source suppliers for reasons of quality assurance, regulatory
requirements, cost effectiveness, availability or uniqueness of design. If these or other suppliers encounter financial, operating or other difficulties or if
our relationship with them changes, we might not be able to quickly establish or qualify replacement sources of supply. The supply chains for our
businesses can also be disrupted by supplier capacity constraints, bankruptcy or exiting of the business for other reasons, decreased availability of key
raw materials or commodities and external events such as natural disasters, pandemic health issues, war, terrorist actions, governmental actions (such as
trade protectionism) and legislative or regulatory changes. Any of these factors can result in production interruptions, delays, extended lead times and
inefficiencies. Because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions, at times
our manufacturing capacity exceeds or falls short of our production requirements. Any or all of these problems can result in the loss of customers,
provide an opportunity for competing products to gain market acceptance and otherwise adversely affect our business and financial results.
23 The Company relies heavily on internal manufacturing and related operations to produce, package and distribute its products which, if
disrupted, could materially impair our business operations. Our business could be adversely affected by disruptions at our sites.
The Company’s internal quality control, packaging and distribution operations support the majority of the Company’s sales. Since certain Company
products must comply with FDA regulations and because in all instances, the Company creates value for its customers through the development of high-
quality products, any significant decline in quality or disruption of operations for any reason could adversely affect sales and customer relationships, and
therefore adversely affect the business. While we have taken certain steps to manage these operational risks, the Company’s future sales growth and
earnings may be adversely affected by perceived disruption risks or actual disruptions.
We rely upon our manufacturing operations to produce many of the products we sell and our warehouse facilities to store products, pending sale. Any
significant disruption of those operations for any reason, such as strikes or other labor unrest, power interruptions, fire, hurricanes or other events
beyond our control could adversely affect our sales and customer relationships and therefore adversely affect our business. We have significant
operations in California, near major earthquake faults, which make us susceptible to earthquake risk. Although most of our raw materials are available
from a number of potential suppliers, our operations also depend upon our ability to obtain raw materials at reasonable prices. If we are unable to obtain
the materials we need at a reasonable price, we may not be able to produce certain of our products or we may not be able to produce certain of these
products at a marketable price, which could have an adverse effect on our results of operations.
Climate change, or legal or regulatory measures to address climate change, may negatively affect us.
Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our
operations. For example, we have significant operations in California, where serious drought has made water less available and more costly and has
increased the risk of wildfires. Changes in climate patterns leading to extreme heat waves or unusual cold weather at some of our locations can lead to
increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our supply chains and distribution systems.
Concern over climate change can also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions or
mitigate the effects of climate change on the environment. Any such new or additional legal or regulatory requirements may increase the costs
associated with, or disrupt, sourcing, manufacturing and distribution of our products, which may adversely affect our business and financial results. In
addition, any failure to adequately address stakeholder expectations with respect to environmental, social and governance (“ESG”) matters may result in
the loss of business, adverse reputational impacts, diluted market valuations and challenges in attracting and retaining customers and talented
employees. In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that
could impact our profitability.
Defects, unanticipated use of, or inadequate disclosure with respect to our products, or allegations thereof, can adversely affect our business
and financial results.
Certain of our products and services are sold for use in diagnostics. For those products and services in particular, manufacturing or design defects in,
unanticipated use of, safety or quality issues (or the perception of such issues) with respect to, “off label” use of, or inadequate disclosure of risks
relating to the use of products and services that we make or sell (including items that we source from third-parties) can lead to personal injury, death,
and/or property damage and adversely affect our business and financial results. These events can lead to recalls or safety alerts, result in the removal of a
product or service from the market and result in product liability or similar claims being brought against us. Recalls, removals and product liability and
similar claims (regardless of their validity or ultimate outcome) result in significant costs, as well as negative publicity and damage to our reputation that
could reduce demand for our products and services. Our business can also be affected by studies of the utilization, safety and efficacy of medical device
products and components that are conducted by industry participants, government agencies and others. Any of the above can result in the
discontinuation of marketing of such products in one or more countries and give rise to claims for damages from persons who believe they have been
injured as a result of product issues, including claims by individuals or groups seeking to represent a class.
24 Because we rely heavily on third-party package-delivery services, a significant disruption in these services or significant increases in prices may
disrupt our ability to ship products, increase our costs and lower our profitability.
Most of our reagent products need to be stored and shipped at certain cold temperatures. Consequently, we ship a significant portion of our products to
our customers by express mail or air delivery through package delivery companies, such as FedEx in the U.S. and DHL in Europe. If one or more of
these third-party package-delivery providers were to experience a major work stoppage, preventing our products from being delivered in a timely
fashion or causing us to incur additional shipping costs we could not pass on to our customers, our costs could increase and our relationships with
certain of our customers could be adversely affected. In addition, if one or more of these third-party package-delivery providers were to increase prices,
and we were not able to find comparable alternatives or make adjustments in our delivery network, our profitability could be adversely affected.
Intellectual Property Risks
We are dependent on maintaining our intellectual property rights. If we are unable to adequately protect our intellectual property, or if third
parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights.
Many of the markets we serve are technology-driven, and as a result intellectual property rights play a significant role in product development and
differentiation. We own numerous patents, trademarks, copyrights, trade secrets and other intellectual property and licenses to intellectual property
owned by others, which in aggregate are important to our business. The intellectual property rights that we obtain, however, are not always sufficiently
broad and do not always provide us a significant competitive advantage, and patents may not be issued for pending or future patent applications owned
by or licensed to us. In addition, the steps that we and our licensors have taken to maintain and protect our intellectual property do not always prevent it
from being challenged, invalidated, circumvented, designed around or becoming subject to compulsory licensing. In some circumstances, enforcement
is not available to us because an infringer has a dominant intellectual property position or for other business reasons. We also rely on nondisclosure and
noncompetition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no
assurance that these agreements adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate
remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not
otherwise gain access to our trade secrets or other proprietary rights.
These risks are particularly pronounced in countries in which we do business that do not have levels of protection of corporate proprietary information,
intellectual property, technology and other assets comparable to the United States. We operate globally, with manufacturing operations in China and the
UK, and approximately 43% of our revenue in fiscal 2023 was from outside the United States. The laws, regulations and enforcement mechanisms in
other countries may in some cases be less protective of our intellectual property rights. Our failure to obtain or maintain intellectual property rights that
convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property and
the cost of enforcing our intellectual property rights can adversely impact our business and financial results.
We may be involved in disputes to determine the scope, coverage and validity of others’ proprietary rights, or to defend against third-party
claims of intellectual property infringement, any of which could be time-intensive and costly and may adversely impact our business.
Our success depends in part on our ability to operate without infringing the proprietary rights of others, and to obtain licenses where necessary or
appropriate. We have obtained and continue to negotiate licenses to produce a number of products claimed to be owned by others. Since we have not
conducted a patent infringement study for each of our products, it is possible that some of our products may unintentionally infringe patents of third
parties.
We have been and may in the future be sued by third parties alleging that we are infringing their intellectual property rights. These lawsuits are
expensive, take significant time, and divert management’s focus from other business concerns. If we are found to be infringing the intellectual property
of others, we could be required to cease certain activities, alter
25 our products or processes or pay licensing fees. This could cause unexpected costs and delays which may have a material adverse effect on us. If we are
unable to obtain a required license on acceptable terms, or unable to design around any third party patent, we may be unable to sell some of our products
and services, which could result in reduced revenue. In addition, if we do not prevail, a court may find damages or award other remedies in favor of the
opposing party in any of these suits, which may adversely affect our earnings.
Financial and Tax Risks
We have entered into and drawn on a revolving credit facility, and we may incur additional debt in the future. The burden of this additional
debt could adversely affect us, make us more vulnerable to adverse economic or industry conditions, and prevent us from funding our
expansion strategy.
We currently have a Credit Agreement that 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 bear interest at a variable rate. As of August 18, 2023, the Company had drawn
$490 million under the Credit Agreement.
The terms of the Credit Agreement and the burden of the indebtedness incurred thereunder could have negative consequences for us, such as:
● limiting our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, expansion
strategy, or other needs;
● increasing our vulnerability to, and reducing our flexibility in planning for, adverse changes in economic, industry and competitive
conditions; and
● increasing our vulnerability to increases in interest rates.
The Credit Agreement also contains negative covenants that limit our ability to engage in specified types of transactions. These covenants limit our
ability to, among other things, sell, lease or transfer any properties or assets, with certain exceptions; and enter into certain merger, consolidation or
other reorganization transactions, with certain exceptions.
A breach of any of these covenants could result in an event of default under our credit facility. Upon the occurrence of an event of default, the lender
could elect to declare all amounts outstanding under such facility to be immediately due and payable and terminate all commitments to extend further
credit. In addition, the Company would be subject to additional restrictions if an event of default exists under the Credit Agreement, such as a
prohibition on the payment of cash dividends.
Our business and financial results can be adversely affected by foreign currency exchange rates, changes in our tax rates and tax liabilities and
assessments (including as a result of changes in tax laws).
International markets contribute a substantial portion of our revenues, and we intend to continue expanding our presence in these regions. The exposure
to fluctuations in currency exchange rates takes on different forms. International revenues and costs are subject to the risk that fluctuations in exchange
rates could adversely affect our reported revenues and profitability when translated into U.S. dollars for financial reporting purposes. These fluctuations
could also adversely affect the demand for products and services provided by us. As a multinational corporation, our businesses occasionally invoice
third-party customers in currencies other than the one in which they primarily do business (the "functional currency"). Movements in the invoiced
currency relative to the functional currency could adversely impact our cash flows and our results of operations. As our international sales grow,
exposure to fluctuations in currency exchange rates could have a larger effect on our financial results. In fiscal 2023, currency translation had
an unfavorable effect of $21 million on revenues due to the strengthening of the U.S. dollar relative to other currencies in which the company sells
products and services.
As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. In particular, we are affected by the impact of
changes to tax laws or related authoritative interpretations in the United States, including tax reform under the Tax Cuts and Jobs Act which became
effective in late 2017, which included broad and complex changes
26 to the United States tax code. Interpretations, assumptions and guidance regarding the Tax Act that have been issued subsequently have had a material
impact on our effective tax rate, and we anticipate that there may be additional changes to the U.S. tax code under a new Administration.
In preparing our financial results, we record the amount of tax that is payable in each of the countries, states and other jurisdictions in which we operate.
Our future effective tax rate, however, may be lower or higher than experienced in the past due to numerous factors, including a change in the mix of
our profitability from country to country, changes in accounting for income taxes and recently enacted and future changes in tax laws in jurisdictions in
which we operate. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current
expectations, which could have an adverse effect on our business, results of operations and cash flows.
Dividends on our common stock could be reduced or eliminated in the future.
For many years, our Board has declared quarterly dividends. In the future, our Board may determine to reduce or eliminate our common stock dividend
in order to fund investments for growth, repurchase shares or conserve capital resources.
Legal, Regulatory, Compliance and Reputational Risks
Our business is subject to extensive regulation; failure to comply with these regulations could adversely affect our business and financial
results.
As referenced in more detail above, we and our customers must comply with a wide array of federal, state, local and international regulations, in such
areas as medical device, healthcare, import and export, anticorruption, and privacy. We develop, configure and market our products to meet customer
needs created by those regulations. Any significant change in regulations could reduce demand for our products or increase our expenses. For example,
many of our instruments are marketed to the pharmaceutical industry for use in discovering and developing drugs and diagnostic products. Changes in
the U.S. FDA’s regulation of drug or medical device products, such as managing the price of certain prescription drugs or potentially increasing
regulatory scrutiny of lab developed tests, could have an adverse effect on the demand for these products.
We have agreements relating to the sale of our products to government entities in the U.S. and elsewhere and, as a result, we are subject to various
statutes and regulations that apply to companies doing business with the government (less than 3% of our fiscal 2023 sales were made to the U.S.
federal government). The laws governing government contracts differ from the laws governing private contracts and government contracts may contain
pricing terms and conditions that are not applicable to private contracts. We are also subject to investigation for compliance with the regulations
governing government contracts. A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and
administrative penalties or debarment.
We are subject to various local, state, federal, foreign and transnational laws and regulations, which include the operating and security standards of the
U.S. FDA, the U.S. Drug Enforcement Agency (the DEA), the U.S. Department of Health and Human Services (the DHHS), and other comparable
agencies and, in the future, any changes to such laws and regulations could adversely affect us. In particular, we are subject to laws and regulations
concerning current good manufacturing practices. Our subsidiaries may be required to register for permits and/or licenses with, and may be required to
comply with the laws and regulations of, the DEA, the FDA, the DHHS, foreign agencies and/or comparable state agencies as well as certain accrediting
bodies depending upon the type of operations and location of product distribution, manufacturing and sale. The manufacture, distribution and marketing
of many of our products and services, including medical devices and pharma services, are subject to extensive ongoing regulation by the FDA, the DEA,
and other equivalent local, state, federal and non-U.S. regulatory authorities. In addition, we are subject to inspections by these regulatory authorities.
For example, the EU has adopted the In Vitro Diagnostic Regulation (the “EU IVDR”), which imposes stricter requirements for the marketing and sale
of in vitro diagnostic medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.
Manufacturers of in vitro diagnostics medical devices that have been marketed and sold under the prior regulatory regime now have to comply with
some of the new EU IVDR requirements, while the effective date of other requirements have been delayed. Complying with EU IVDR, the regulation
applicable to the Company, may require material modifications to our quality management systems, additional resources in certain functions, updates to
technical files and additional clinical data in some cases, among other
27 changes. Failure by us or by our customers to comply with the requirements of the EU IVDR, or other requirements imposed by these or similar
regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could
result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations,
civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities. In addition, such a
failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or
damaged active pharmaceutical ingredients, as well as ongoing remediation and increased compliance costs, any or all of which could be significant. We
are the sole manufacturer of a number of products for many of our customers and a negative regulatory event could impact our customers’ ability to
provide products to their customers.
We are also subject to a variety of federal, state, local and international laws and regulations that govern, among other things, the importation and
exportation of products, the handling, transportation and manufacture of substances that could be classified as hazardous, and our business practices in
the U.S. and abroad such as anti-competition laws. Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or
obtain necessary permits and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of
operations.
Significant developments or changes in U.S. laws or policies, including changes in U.S. trade policies and tariffs and the reaction of other
countries thereto, can have an adverse effect on our business and financial results.
Significant developments or changes in U.S. laws and policies (including as a result of changes in party control of Congress or decisions from the U.S.
Supreme Court), such as laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries
where we or our customers operate, or governing the health care system and drug prices, can adversely affect our business and financial results. For
example, the previous U.S. administration increased tariffs on certain goods imported into the United States and trade tensions between the United
States and China escalated, with each country imposing significant, additional tariffs on a wide range of goods imported from the other country. That
trade tension has not diminished under the current U.S. administration. The U.S. and China could impose other types of restrictions such as limitations
on government procurement or technology export restrictions, which could affect our access to markets. These factors have adversely affected, and in
the future could further adversely affect, our business and financial results.
Our business and financial results can be impaired by improper conduct by any of our employees, agents or business partners.
We cannot provide assurance that our internal controls and compliance systems, including our Code of Ethics and Business Conduct, protect us from
unauthorized acts committed by employees, agents or business partners of ours (or of businesses we acquire or partner with) that violate U.S. and/or
non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing
practices, conflicts of interest, competition, employment practices and workplace behavior, export and import compliance, economic and trade
sanctions, money laundering and data privacy. In particular, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and similar anti-bribery laws in
other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of
obtaining or retaining business, and we operate in many parts of the world that have experienced governmental corruption to some degree. Any such
improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in
other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause
us to incur significant legal and investigatory fees. In addition, the government may seek to hold us liable for violations committed by companies in
which we invest or that we acquire. We also rely on our suppliers to adhere to our supplier code of conduct, and material violations of such code of
conduct could occur that could have a material effect on our business and financial results.
28 Certain of our businesses are subject to extensive regulation by the U.S. FDA and by comparable agencies of other countries, as well as laws
regulating fraud and abuse in the healthcare industry and the privacy and security of health information. Failure to comply with those
regulations could adversely affect our business and financial results.
Certain of our products are medical devices, diagnostics tests and other products that are subject to regulation by the U.S. FDA or state CLIA
regulations, by other federal and state governmental agencies, by comparable agencies of other countries and regions and by regulations governing
hazardous materials and drugs-of abuse (or the manufacture and sale of products containing any such materials). The global regulatory environment has
become increasingly stringent and unpredictable. Several countries that did not have regulatory requirements for medical devices have established such
requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations, including implementation of IVDR
regulations in Europe. Failure to meet these requirements adversely impacts our business and financial results in the applicable geographies.
Government authorities may conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case
law. Failure to obtain required regulatory clearances before marketing our products (or before implementing modifications to or promoting additional
indications or uses of our products), other violations of laws or regulations, failure to remediate inspectional observations to the satisfaction of these
regulatory authorities, real or perceived efficacy or safety concerns or trends of adverse events with respect to our products (even after obtaining
clearance for distribution) and unfavorable or inconsistent clinical data from existing or future clinical trials can lead to FDA Form 483 Inspectional
Observations, warning letters, notices to customers, declining sales, loss of customers, loss of market share, remediation and increased compliance costs,
recalls, seizures of adulterated or misbranded products, fines, expenses, injunctions, civil penalties, criminal penalties, consent decrees, administrative
detentions, refusals to permit importations, partial or total shutdown of production facilities or the implementation of operating restrictions, narrowing of
permitted uses for a product, refusal of the government to grant 510(k) clearance, suspension or withdrawal of approvals, pre-market notification
rescissions and other adverse effects. Further, defending against any such actions can be costly and time-consuming and may require significant
personnel resources. Therefore, even if we are successful in defending against any such actions brought against us, our business may be impaired.
Ensuring that our internal operations and business arrangements with third parties comply with applicable laws and regulations also involves substantial
costs.
More specifically, as a healthcare provider, the Company’s Exosome Diagnostics’ ExoDx Prostate business is subject to extensive regulation at the
federal, state, and local levels in the U.S. and other countries where it operates. The Company’s failure to meet governmental requirements under these
regulations, including those relating to billing practices and financial relationships with physicians, hospitals, and health systems, could lead to civil and
criminal penalties, exclusion from participation in Medicare and Medicaid, and possibly prohibitions or restrictions on the use of its laboratories. While
the Company believes that it is in material compliance with all statutory and regulatory requirements, there is a risk that government authorities might
take a contrary position. Such occurrences, regardless of their outcome, could damage the Company’s reputation and adversely affect important business
relationships it has with third parties.
Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to the Company’s reputation and
have a material adverse effect upon the Company’s business, a risk that has been elevated with recent acquisitions that use protected health
information and utilize healthcare providers for laboratory resting services.
If the Company does not comply with existing or new laws and regulations related to protecting the privacy and security of personal or health
information, it could be subject to monetary fines, civil penalties or criminal sanctions. In the U.S., the Health Insurance Portability and Accountability
Act of 1996 (HIPAA) privacy and security regulations, including the expanded requirements under U.S. Health Information Technology for Economic
and Clinical Health Act (HITECH), establish comprehensive standards with respect to the use and disclosure of protected health information (PHI) by
covered entities, in addition to setting standards to protect the confidentiality, integrity and security of PHI. HIPAA restricts the Company’s ability to use
or disclose PHI, without patient authorization, for purposes other than payment, treatment or healthcare operations (as defined by HIPAA), except for
disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations. If the laboratory operations for the
Company’s business use or disclose PHI improperly under these privacy regulations, they may incur significant fines and other penalties for wrongful
use or disclosure of PHI in violation of the privacy and security regulations, including potential civil and criminal fines and penalties.
29 There are no unresolved staff comments as of the date of this report.
ITEM 2. PROPERTIES
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Company owns the facilities that its headquarters and R&D Systems subsidiary occupy in Minneapolis, Minnesota. The Minneapolis facilities are
utilized by both the Company’s Protein Sciences and Diagnostics and Genomics segments.
The Minneapolis complex includes approximately 800,000 square feet of space in several adjoining buildings. Bio-Techne uses approximately 710,000
square feet of the complex for administrative, research, manufacturing, shipping and warehousing activities. The Company is currently leasing the
remaining space in the complex as retail and office space. The Company also owns a 61,000 square foot facility in Saint Paul, Minnesota that is utilized
for additional manufacturing capabilities and activities.
The Company also owns a 34,000 square foot manufacturing facility in Flowery Branch, Georgia. This facility is utilized by the Company’s Protein
Sciences segment.
The Company owns a 16,000 square foot facility that its Bio-Techne Europe subsidiary occupies in Abingdon, England. This facility is utilized by the
Company’s Protein Sciences and Diagnostics and Genomics segments.
The Company owns a 9,000 square foot facility that its Canada subsidiaries occupy in Toronto, Canada. This facility is utilized by the Company’s
Protein Sciences segment.
The Company owns a 52,700 square foot manufacturing facility in Wallingford, Connecticut. This facility is utilized by the Company’s Protein Sciences
segment.
The Company leases the following material facilities, which are utilized by both the Company’s Protein Sciences segment the Diagnostics & Genomics
segment. Certain locations are not named because they were not significant individually or in the aggregate as of the date of this report.
Subsidiary
Location
Type
Square Feet
Bio-Techne Ltd
Bio-Techne China
Tocris
PrimeGene
Bionostics
Novus Biologicals
ProteinSimple
ProteinSimple Ltd.
CyVek
Cliniqa
Advanced Cell Diagnostics
Bio-Techne France
Exosome Diagnostics
R&D Systems
Asuragen
Bio-Techne Ireland
Langley, United Kingdom
Shanghai and Beijing, China
Bristol, United Kingdom
Shanghai, China
Devens, Massachusetts
Centennial, Colorado
San Jose, California
Ottawa, Canada
Wallingford, Connecticut
San Marcos, California
Newark, California
Rennes, France
Waltham, Massachusetts
Minneapolis, Minnesota
Austin, Texas
Dublin, Ireland
Warehouse
Office/warehouse
Office/manufacturing/lab/warehouse
Office/manufacturing/lab
Office/manufacturing
Office/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Office/manufacturing/warehouse
Warehouse
ITEM 3. LEGAL PROCEEDINGS
12,000
29,200
30,000
79,900
70,000
74,000
98,000
10,800
22,700
62,800
55,900
11,000
38,400
10,700
47,400
25,000
As of August 18, 2023, the Company is not a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to have a
material adverse effect on the Company’s business, results of operations, financial condition or cash flows.
30
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is listed on the NASDAQ stock exchange under the symbol “TECH”. 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.
Holders of Common Stock and Dividends Paid
As of August 16, 2023, there were over 150,000 beneficial shareholders of the Company’s common stock and over 140 shareholders of record. The
Company paid annual cash dividends totaling $50.3 million, $50.2 million, and $49.6 million in fiscal 2023, 2022, and 2021, respectively. The Board of
Directors periodically considers the payment of cash dividends, and there is no guarantee that the Company will pay comparable cash dividends, or any
cash dividends, in the future.
On August 31, 2022, the Company entered into an amended and restated Credit Agreement that provides for a revolving credit facility of $1 billion,
which can be increased by an additional $400 million subject to certain conditions. The credit facility is governed by a Credit Agreement dated
August 31, 2022 and matures on August 1, 2027. The Credit Agreement that governs the revolving line of credit contains customary events of default
and would prohibit payment of dividends to Company shareholders in the event of a default thereunder.
Issuer Purchases of Equity Securities
During the years ended June 30, 2023 and June 30, 2022, the Company repurchased 222,000 shares of its common stock at an average share price of
$88.12 and 1,576,952 shares at an average share price of $102.06, respectively. The Company's previous share repurchase plan, implemented in fiscal
2019, granted management the discretion to mitigate the dilutive effect of stock option exercises for fiscal 2018, which then increases in each period
subsequent to June 30, 2018 for additional dilutive impacts of stock options exercised in those future periods. On February 2, 2022, the Company
replaced the prior share repurchase plan with a new share repurchase plan that authorizes the Company to purchase up to $400 million in stock. The
Company repurchased 356,952 shares for $41.3 million in fiscal 2022 under the previous plan. The Company repurchased 1,220,000 shares for $119.7
million in fiscal 2022 under the new share repurchase plan. In fiscal 2023, the Company repurchased 222,000 for $19.6 million also under the new share
repurchase plan. As of June 30, 2023, the Company had $260.8 million available to repurchase under our existing plan.
Stock Performance Graph
The following chart compares the cumulative total shareholder return on the Company’s common stock with the S&P 500 Index and the S&P 500 Life
Sciences Tools and Services Index. The comparison assumes $100 was invested on the last trading day before July 1, 2017 in the Company’s common
stock and in each of the foregoing indices and assumes reinvestment of dividends. The Company became part of the S&P 500 Index during fiscal 2022.
31 32 RESERVED
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results,
cash flows and financial condition. We provide quantitative information about the material sales drivers including the effect of acquisitions and changes
in foreign currency at the corporate and segment level. We also provide quantitative information about discrete tax items and other significant factors we
believe are useful for understanding our results. The MD&A should be read in conjunction with the consolidated financial information and related notes
included in this Form 10-K. This discussion contains various “Non-GAAP Financial Measures” and also contains various “Forward-Looking
Statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements entitled “Non-GAAP
Financial Measures” located at the end of this MD&A and “Forward-Looking Information and Cautionary Statements” and “Risk Factors” within Items
1 and 1A of this Form 10-K.
OVERVIEW
Bio-Techne develops, manufactures and sells life science reagents, instruments and services for the research and clinical diagnostic markets worldwide.
With our deep product portfolio and application expertise, we sell integral components of scientific investigations into biological processes and
molecular diagnostics, revealing the nature, diagnosis, etiology and progression of specific diseases. Our products aid in drug discovery efforts and
provide the means for accurate clinical tests and diagnoses.
We manage the business in two operating segments – our Protein Sciences segment and our Diagnostics and Genomics segment. Our Protein Sciences
segment is a leading developer and manufacturer of high-quality biological reagents used in all aspects of life science research, diagnostics and cell and
gene therapy. This segment also includes proteomic analytical tools, both manual and automated, that offer researchers and pharmaceutical
manufacturers efficient and streamlined options for automated western blot and multiplexed ELISA workflow. Our Diagnostics and Genomics segment
develops and manufactures diagnostic products, including controls, calibrators, and diagnostic assays for the regulated diagnostics market, exosome-
based molecular diagnostic assays, advanced tissue-based in-situ hybridization assays for spatial genomic and tissue biopsy analysis, and genetic and
oncology kits for research and clinical applications.
RECENT ACQUISITIONS
A key component of the Company's strategy is to augment internal growth at existing businesses with complementary acquisitions. As disclosed in Note
4, the Company completed the acquisition of Namocell, Inc for $101.2 million, net of cash acquired, plus contingent consideration of up to $25 million
upon the achievement of future milestones. We also purchased a 19.9% investment in Wilson Wolf and, as disclosed in Note 1, will acquire the
remaining shares in Wilson Wolf by the end of calendar year 2027, or earlier depending on the achievement of certain future milestones. As further
disclosed in Note 14, the Company closed on the acquisition of Lunaphore Technologies SA on July 7, 2023.
OVERALL RESULTS
Operational Update
For fiscal 2023, consolidated net sales increased 3% as compared to fiscal 2022. Organic growth was 5%, with foreign currency translation having an
unfavorable impact of 2% and acquisitions having an immaterial impact. Organic revenue growth was primarily driven by consumable growth in both
our Diagnostics and Genomics and Protein Sciences segments.
Consolidated earnings, including non-controlling interest, increased 8% compared to fiscal 2022. The increase in earnings was driven by a gain on the
sale of our ChemoCentryx investment and a gain on the sale of our investment in Changzhou Eminence Biotechnology Co., Ltd. (Eminence). After
adjusting for acquisition related costs, intangibles amortization, stock-based compensation, restructuring costs, gain on investments, and impact from
partially-owned consolidated subsidiaries, adjusted net earnings attributable to Bio-Techne decreased 1% in fiscal 2023 as compared to
33 fiscal 2022. Adjusted net earnings attributable to Bio-Techne was primarily impacted by foreign currency exchange and strategic growth investments
including the Namocell acquisition.
For fiscal 2022, consolidated net sales increased 19% as compared to fiscal 2021. Organic growth was 17%, with acquisitions having a favorable impact
of 3% and foreign currency translation having an unfavorable impact of 1%. Organic revenue growth was broad based and driven by overall execution
of the Company's long-term growth strategy.
Consolidated earnings, including non-controlling interest, increased 88% in fiscal 2022 compared to fiscal 2021. The increase in earnings was driven by
non-operating mark-to-market gain of $16 million on our ChemoCentryx investment in fiscal year 2022, compared to a loss on the investment of $67.9
million in the prior fiscal year. Additionally, fiscal year 2022 had adjustments of $20.4 million of benefit related to contingent considerations as
compared to a charge of $5.3 million in the prior fiscal year. After adjusting for acquisition related costs, intangibles amortization, stock-based
compensation, restructuring costs, the gain on investment, and impact from partially-owned consolidated subsidiaries, adjusted net earnings increased
18% in fiscal 2022 as compared to fiscal 2021. Adjusted earnings growth was primarily driven by sales growth.
Business Strategy Update
Environmental
The Company’s key business strategies for long-term growth and profitability continue to be geographic expansion, core product innovation,
acquisitions and talent retention and development. As a Company, we are integrating consideration of greenhouse gas emissions and other
environmental variables into our key business strategies. The Company also strives to innovate and improve all aspects of Bio-Techne’s operations,
including reducing the environmental impacts of our manufacturing operations. As described in our Corporate Sustainability Report, among other
initiatives, the Company is currently focused on establishing a baseline for emissions to develop appropriate emission reduction targets, as well as
reducing our environmental footprint through changes in packaging and shipping materials.
In response to the COVID-19 pandemic, the Company took additional steps to monitor and strengthen our supply chain to maintain an uninterrupted
supply of our critical products and services. The Company has maintained these procedures while incorporating additional considerations regarding
potential adverse weather events associated with climate change.
The financial impact of potential environmental regulations pertaining to carbon emissions or the integration of climate change impacts into our core
business strategies are not expected to materially alter the Company’s near-term financial results. Additionally, the Company has established a cross-
functional internal council and working group to monitor and report on its sustainability efforts, including those related to measuring and mitigating
greenhouse gas emissions.
Digital
In driving our key business strategies, the Company utilizes digital networks and systems for data transmission, transaction processing, and storing of
electronic information. As disclosed in “Item 1A. Risk Factors”, increased cybersecurity attack activity poses a risk for our business. In response to this
risk, the Company actively completes system patching and required maintenance, performs internal and third-party employee training, monitors network
and system activity, and completes data backups for our systems. However, even with the Company’s procedures performed, our digital networks and
systems are still potentially vulnerable to cyberattacks.
The financial impact of our cybersecurity initiatives and activities are ongoing and not expected to have a material impact on our financial results.
However, the impact on our business operations and financial results from a material cyber breach would be unknown and dependent on the nature of
the breach.
34
RESULTS OF OPERATIONS
Net Sales
Consolidated organic net sales exclude the impact of companies acquired during the first 12 months post-acquisition and the effect of the change from
the prior year in exchange rates used to convert sales in foreign currencies (primarily the euro, British pound sterling, and Chinese yuan) into U.S.
dollars.
Consolidated net sales growth was as follows:
Organic sales growth
Acquisitions sales growth
Impact of foreign currency fluctuations
Consolidated net sales growth
Consolidated net sales by segment were as follows (in thousands):
Protein Sciences
Diagnostics and Genomics
Intersegment
Consolidated net sales
2023
Year Ended June 30,
2022
2021
5 %
0 %
(2)%
3 %
17 %
3 %
(1)%
19 %
22 %
1 %
3 %
26 %
Year Ended June 30,
2023
845,747
292,602
(1,647)
1,136,702
$
$
2022
832,311
274,843
(1,555)
1,105,599
$
$
2021
704,564
227,744
(1,276)
931,032
$
$
In fiscal 2023, Protein Sciences segment net sales increased 2% compared to fiscal 2022. Organic growth for the segment was 4% for the fiscal year,
with currency translation having an unfavorable impact of 2% and acquisitions having an immaterial impact on revenue growth. Segment growth was
driven by growth in consumable revenue to BioPharma (especially those developing cell and gene therapies) and Academic customers within the
Americas and Europe.
In fiscal 2023, Diagnostics and Genomics segment net sales increased 6% compared to fiscal 2022. Organic growth for the segment was 8% with
currency translation having an unfavorable impact of 2%. Segment growth was driven by growth in consumable revenue from our Spatial Biology
platform and an increase in service revenue related to our ExoDx Prostate test.
In fiscal 2022, Protein Sciences segment net sales increased 18% compared to fiscal 2021. Organic growth for the segment was 19% for the fiscal year,
with currency translation having an unfavorable 1% impact on revenue.
Overall segment growth was driven by strong BioPharma demand resulting in broad-based growth across our proteomic research reagents and analytical
tools
In fiscal 2022, Diagnostics and Genomics segment net sales increased 21% compared to fiscal 2021. Organic growth for the segment was 10% with
acquisitions contributing 11% and currency translation having an immaterial impact on revenue growth.
Segment growth was driven by the full year impact of the Asuragen acquisition and organic growth. Organic growth was driven by an exclusive
agreement entered into for development, finalization and commercialization of our ExoTRU kidney transplant rejection test, and continued strength in
our diagnostic reagent product lines.
35
Gross Margins
Consolidated gross margins were 67.7%, 68.4%, and 68.0% in fiscal 2023, 2022, and 2021. Consolidated gross margins were impacted by
revenue. Excluding the impact of acquired inventory sold, amortization of intangibles, stock compensation expense, and the impact of partially-owned
consolidated subsidiaries, adjusted gross margins were 71.7%, 72.5%, and 72.3% in fiscal 2023, 2022, and 2021, respectively. Fiscal 2023 consolidated
gross margin was unfavorably impacted by foreign currency exchange and strategic growth investments including the Namocell acquisition when
compared to the prior period. Consolidated gross margins for fiscal 2022 and fiscal 2021 were impacted as a result of volume leverage and product mix,
partially offset by additional investments made in the business to support future growth.
A reconciliation of the reported consolidated gross margin percentages, adjusted for acquired inventory sold and intangible amortization included in cost
of sales, is as follows:
Consolidated gross margin percentage
Identified adjustments:
Costs recognized upon sale of acquired inventory
Amortization of intangibles
Stock compensation expense - COGS
Impact of partially-owned consolidated subsidiaries(1)
Non-GAAP adjusted gross margin percentage
Year Ended June 30,
2022
2021
2023
67.7 %
68.4 %
68.0 %
0.0 %
4.0 %
0.1 %
(0.1)%
71.7 %
0.1 %
3.7 %
0.1 %
0.2 %
72.5 %
0.2 %
3.8 %
0.2 %
0.1 %
72.3 %
(1)Adjusted gross margin percentages for fiscal 2021 have been updated for comparability to fiscal 2022 and fiscal 2023 for the inclusion of the impact
of partially-owned consolidated subsidiaries on the Company’s adjusted gross margin percentage.
Fluctuations in adjusted gross margins, as a percentage of net sales, have primarily resulted from changes in foreign currency exchange rates and
changes in product mix. We expect that, in the future, gross margins will continue to be impacted by the mix of our portfolio growing at different rates
as well as future acquisitions.
Management uses adjusted operating results to monitor and evaluate performance of the Company’s two segments. Segment gross margins, as
a percentage of net sales, were as follows:
Protein Sciences
Diagnostics and Genomics
2023
Year Ended June 30,
2022
2021
75.3 %
61.2 %
75.5 %
63.1 %
76.0 %
60.5 %
The change in the Protein Sciences segment’s gross margin percentage for fiscal 2023 as compared to fiscal 2022 and 2021 was primarily attributable
to mix of product sales within the segment.
The change in the Diagnostics and Genomics segment’s gross margin is related to fiscal 2022 revenue related to the ExoTru kidney transplant rejection
agreement that did not occur in fiscal 2023 nor fiscal 2021. Fiscal 2023 compared to fiscal 2022 was also impacted by strategic investments to drive
future growth that was partially offset by volume leverage.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.6 million (2%) in fiscal 2023 when compared to fiscal 2022. Selling, general, and
administrative expenses increased primarily due to strategic investments made in the business to support future growth including the Namocell
acquisition.
36
Selling, general and administrative expenses increased $47.8 million (15%) in fiscal 2022 when compared to fiscal 2021. Selling, general, and
administrative expenses increased primarily due to the full year impact of fiscal 2021’s Asuragen acquisition and strategic investments made in the
business to support future growth.
Consolidated selling, general and administrative expenses were composed of the following (in thousands):
Protein Sciences
Diagnostics and Genomics
Total segment expenses
Amortization of intangibles
Acquisition related expenses
Eminence Impairment(1)
Restructuring costs
Stock-based compensation
Corporate selling, general and administrative expenses
Total selling, general and administrative expenses
2023
Year Ended June 30,
2022
2021
$
$
203,834
101,805
305,639
32,076
(9,965)
—
3,829
40,269
6,530
378,378
$
$
195,328
93,578
288,906
32,492
(19,082)
18,715
1,640
45,085
5,010
372,766
$
$
159,489
75,160
234,649
27,788
7,097
—
142
50,200
5,075
324,951
(1)Refer to the Goodwill Impairment section within the Critical Accounting Policies for further details on the Eminence impairment.
Research and Development Expenses
Research and development expenses increased $5.4 million (6%) and $16.5 million (23%) in fiscal 2023 and 2022, respectively, as compared to
prior year periods. The increase in research and development expenses in fiscal 2023 as compared to 2022 was primarily attributable to strategic growth
investments including the Namocell acquisition. The increase in research and development expenses in fiscal 2022 as compared to fiscal 2021 was
primarily attributable to strategic growth investments and the Asuragen acquisition in the fourth quarter of fiscal 2021.
Protein Sciences
Diagnostics and Genomics
Total segment expenses
Unallocated corporate expenses
Total research and development expenses
Net Interest Income / (Expense)
2023
Year Ended June 30,
2022
2021
$
$
$
58,251
34,242
92,493
$
56,370
30,770
87,140
—
$
92,493
—
$
87,140
46,361
24,242
70,603
—
70,603
Net interest income/(expense) for fiscal 2023, 2022, and 2021 was ($7.8) million, $(10.5) million, and $(13.5) million, respectively. Net interest expense
in fiscal 2023 decreased when compared to fiscal 2022 due to a favorable rate on a forward starting interest rate swap as disclosed in Note 5 that went
into effect in fiscal year 2023.
Net interest expense in fiscal 2022 decreased when compared to fiscal 2021 due to a reduction in our average long-term debt, which coincided with a
reduction in the notional amount on our previous interest rate swap as disclosed in Note 5.
37
Other Non-Operating Income / (Expense), Net
Other non-operating expense, net, consists of foreign currency transaction gains and losses, rental income, building expenses related to rental property
and the Company’s gains and losses on investments as follows (in thousands):
Foreign currency gains (losses)
Rental income
Real estate taxes, depreciation and utilities
Gain (loss) on investment
Gain (loss) on equity method investment
Miscellaneous (expense) income
Other non-operating income (expense), net
2023
Year Ended June 30,
2022
2021
$
$
676
426
(1,810)
49,328
(1,143)
43
47,520
$
$
699
599
(2,035)
15,186
—
862
15,311
$
$
(6,650)
1,036
(1,845)
(68,047)
—
(136)
(75,642)
During fiscal 2023, the Company recognized gains of $37.2 million related to the sale of our ChemoCentryx, Inc. (CCXI) investment, $11.7 million
related to the sale of our Eminence investment, and a gain of $0.4 million related to the change in fair value of our exchange traded bond funds.
Additionally, the Company recognized losses of $1.1 million related to our equity method investment in Wilson Wolf.
During fiscal 2022, the Company recognized gains of $16.1 million related to changes in fair value associated with changes in the stock price
of our CCXI investment. Additionally, the Company recognized losses of $1.1 million related to changes in fair value associated with changes in the
stock price of our exchange traded investment grade bond funds. On August 4, 2022, the Company sold all of its shares in CCXI.
During fiscal 2021, the Company recognized losses of $67.9 million related to changes in fair value associated with changes in the stock price
of our CCXI investment.
Income Taxes
Income taxes for fiscal 2023, 2022, and 2021 were at effective rates of 15.7%, 12.7%, and 5.8%, respectively, of consolidated earnings before income
taxes. The change in the effective tax rate for fiscal 2023 compared to fiscal 2022 was driven by share-based compensation as the number of stock
option exercises decreased compared to the prior year comparative period due to the decline in the stock price. The Company had share-based
compensation excess tax benefits of $12.3 million in fiscal 2023. The Company’s discrete tax benefits in fiscal 2022 primarily related to share-based
compensation excess tax benefits of $29.3 million. The Company’s discrete tax benefits in fiscal 2021 primarily related to share-based compensation
excess tax benefits of $28.1 million.
38
Net Earnings
Non-GAAP adjusted consolidated net earnings and earnings per share are as follows (in thousands):
Net earnings before taxes - GAAP
Identified adjustments attributable to Bio-Techne:
Costs recognized upon sale of acquired inventory
Amortization of intangibles
Amortization of Wilson Wolf intangible assets and acquired inventory
Acquisition related expenses and other
Eminence impairment
Gain on sale of partially-owned consolidated subsidiaries
Stock based compensation, inclusive of employer taxes
Restructuring costs
Investment (gain) loss and other non-operating
Impact of partially-owned subsidiaries(1)
Net earnings before taxes - Adjusted
Non-GAAP tax rate
Non-GAAP tax expense
Non-GAAP adjusted net earnings attributable to Bio-Techne(1)
Earnings per share - diluted - Adjusted(2)
Year Ended June 30,
2022
2021
2023
$
338,659
$
301,386
$
148,175
400
76,413
2,805
(9,147)
—
(11,682)
41,217
3,829
(37,646)
(420)
404,428
$
1,596
73,054
—
(18,694)
18,715
—
46,401
1,640
(16,171)
2,675
410,602
1,565
64,239
—
7,489
—
—
51,846
142
68,391
1,390
343,237
$
20.5 %
$
$
$
82,948
321,480
1.99
21.2 %
$
$
$
87,090
323,512
1.97
20.2 %
69,478
273,759
1.69
$
$
$
$
(1) Adjusted consolidated net earnings and earnings per share for fiscal 2021 have been updated for comparability to fiscal 2023 and 2022 for the
inclusion of the impact of partially-owned consolidated subsidiaries on the Company’s adjusted consolidated net earnings and earnings per share.
(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. Refer to Note 1 for details.
Depending on the nature of discrete tax items, our reported tax rate may not be consistent on a period to period basis. The Company independently
calculates a non-GAAP adjusted tax rate considering the impact of discrete items and jurisdictional mix of the identified non-GAAP adjustments. The
following table summarizes the reported GAAP tax rate and the effective Non-GAAP adjusted tax rate for the periods ended June 30, 2023, 2022, and
2021.
GAAP effective tax rate
Discrete items
Impact of non-taxable net gain
Long-term GAAP tax rate
Rate impact items
Stock based compensation
Other
Total rate impact items
Non-GAAP adjusted tax rate
2023
Year Ended June 30,
2022
2021
15.7 %
3.4
0.7
19.8 %
(1.4)
2.1
0.7 %
20.5 %
12.7 %
11.3
—
24.0 %
(1.9)
(0.9)
(2.8)%
21.2 %
5.8 %
19.0
—
24.8 %
(5.7)
1.1
(4.6)%
20.2 %
39
Refer to Note 12 for additional discussion relating to the change in discrete tax items between fiscal 2023 and fiscal 2022.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and available-for-sale investments at June 30, 2023 were $204.3 million compared to $247.0 million at June 30, 2022. Included
in the available-for-sale-investments was the fair value of the Company’s investment in exchange traded investment grade bond funds, which was $23.7
million as of June 30, 2023 and $23.9 million as of June 30, 2022. During the first fiscal quarter, the Company sold its remaining shares of its
investment in CCXI. As of June 30, 2022, the fair value of the Company’s investment in CCXI was $36.0 million. Also included in the June 30, 2022
balance were $14.5 million of certificates of deposit that were sold and not repurchased during fiscal year 2023.
At June 30, 2023, approximately 39% of the Company’s cash and equivalent account balances of $68.5 million were located in the U.S., with the
remainder located in primarily in Canada, China, the U.K. and other European countries.
At June 30, 2023, all of the Company’s available-for-sale investment account balances of $23.7 million were located in Canada.
At June 30, 2023, we had $350 million in borrowings under the revolving credit facility, resulting in $650 million of unutilized availability under our
revolving credit facility.
The Company has either paid U.S. taxes on its undistributed foreign earnings or intends to indefinitely reinvest the undistributed earnings in the foreign
operations or expects the earnings will be remitted in a tax neutral transaction. Management of the Company expects to be able to meet its cash and
working capital requirements for operations, facility expansion, capital additions, and cash dividends for the foreseeable future, and at least the next
12 months, through currently available funds, including funds available through our line-of-credit and cash generated from operations.
Future acquisition strategies may or may not require additional borrowings under the line-of-credit facility or other outside sources of funding.
Cash Flows From Operating Activities
The Company generated cash from operations of $254.4 million, $325.3 million, and $352.2 million in fiscal 2023, 2022, and 2021 respectively. The
decrease in cash generated from operating activities in fiscal 2023 as compared to fiscal 2022 was mainly a result of changes in net earnings and
changes in the timing of cash payments on certain operating assets and liabilities. The decrease in cash generated from operating activities in fiscal
2022 as compared to fiscal 2021 was mainly a result of changes in the timing of cash payments on certain operating assets and liabilities, largely offset
by an increase in year over year net earnings.
Cash Flows From Investing Activities
We continue to make investments in our business, including capital expenditures. During fiscal year 2023, the Company acquired Namocell, Inc for
$101.2 million, net of cash acquired. There were no acquisitions fiscal year 2022. The Company acquired Eminence and Asuragen during fiscal year
2021 for a total of approximately $225.4 million, net of cash acquired.
During the first fiscal quarter of 2023, the Company sold its remaining shares in Eminence, its partially-owned consolidated subsidiary, for $17.8
million. There were no sales of businesses in the comparative prior year period.
In the first fiscal quarter of 2023, the Company sold its remaining shares in its investment in CCXI for $73.2 million. There were no comparable
activities in the comparative prior year period.
The Company’s net proceeds (outflow) from the purchase, sale and maturity of available-for-sale investments in fiscal 2023, 2022, and 2021 were $14.7
million, $(26.9) million, and $26.7 million, respectively. During fiscal year 2023, the Company’s proceeds in available-for-sale investments relates to
the sale of excess cash in certificates of deposit that matured. As of June 30, 2023, there were no outstanding certificates of deposit. The outflow of cash
in fiscal year 2022 compared to fiscal year 2023 and fiscal year 2021 was driven by the purchase of the exchange traded investment
40 grade bond funds in fiscal year 2022, which have a cost basis of $25.0 million, that did not reoccur in the comparative periods. The proceeds in fiscal
2021 related to the sale of excess cash in certificates of deposit. The Company’s investment policy is to place excess cash in certificates of deposit with
the objective of obtaining the highest possible return while minimizing risk and keeping the funds accessible.
Capital additions in fiscal year 2023, 2022, and 2021 were $38.2 million, $44.9 million, and $44.3 million. Fiscal 2023 capital expenditures related to
investments in new buildings, machinery, and IT equipment. Fiscal 2023 capital expenditures related to investments in new buildings, machinery, and IT
equipment . Capital additions planned for fiscal 2024 are approximately $65 million and are expected to be financed through currently available cash
and cash generated from operations. Increase in expected additions in fiscal 2024 is related to increasing capacity to meet expected sales growth across
the Company.
During the year ended June 30, 2022, the Company paid $25 million to enter into a two-part forward contract which requires the Company to purchase
the full equity interest in Wilson Wolf if certain annual revenue or EBITDA thresholds are met. During fiscal year 2023, Wilson Wolf met the EBITDA
target and the Company paid an additional $232 million to acquire 19.9% of Wilson Wolf. The second option payment of approximately $1 billion plus
potential contingent consideration is forecasted to occur between fiscal 2026 and fiscal 2028. There were no comparable activities in the comparative
prior year period.
Cash Flows From Financing Activities
In fiscal 2023, 2022, and 2021, the Company paid cash dividends of $50.3 million, $50.2 million, $49.6 million, respectively. The Board of Directors
periodically considers the payment of cash dividends.
The Company received $29.8 million, $77.2 million, $65.1 million, for the exercise of options for 1,578,000, 2,450,000, and 2,509,000 shares of
common stock in fiscal 2023, 2022 and 2021, respectively.
During fiscal 2023, 2022, and 2021, the Company repurchased $19.6 million, $161.0 million, and $43.2 million, respectively, in share repurchases
included as a cash outflow within Financing Activities.
During fiscal 2023, 2022, and 2021, the Company drew $619.7 million, $90.0 million, and $256.0 million, respectively, under its revolving line-of-
credit facility. Repayments of $525.7 million, $175.5 million, and $271.5 million were made on its line-of-credit in fiscal 2023, 2022, and 2021,
respectively.
There were no payments during fiscal 2023 for contingent consideration. During fiscal 2022, the Company made $4.0 million in cash payments towards
the Quad contingent consideration liability. Of the $4.0 million in total payments, $0.7 million is classified as financing on the statement of cash flows.
The remaining $3.3 million is recorded as operating on the statement of cash flows as it represents the consideration liability that exceeds the amount of
the contingent consideration liability recognized at the acquisition date. During fiscal 2021, there were no payments related to contingent consideration
classified as financing activities. The Company made $0.3 million in contingent consideration payments, which were classified within operating
activities
During fiscal 2023, 2022 and 2021, the Company paid $28.9 million, $23.5 million and $19.3 million, respectively, for taxes remitted on behalf of
participants in net share settlement transactions and restricted stock units. This is included as a cash outflow within the other financing activities line of
the consolidated statements of cash flows.
The increase in other financing activity during fiscal 2023 compared to fiscal 2022 is primarily related to fees for the amended Credit Agreement that
occurred in the first fiscal quarter.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s Consolidated
Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates.
41 Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.
The Company has identified the policies outlined below as critical to its business operations and an understanding of results of operations. The listing is
not intended to be a comprehensive list of all accounting policies; investors should also refer to Note 1 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K.
Business Combinations
We allocate the purchase price of acquired businesses to the estimated fair values of the assets acquired and liabilities assumed as of the date of the
acquisition. The calculations used to determine the fair value of the long-lived assets acquired, primarily intangible assets, can be complex and require
significant judgment. We weigh many factors when completing these estimates including, but not limited to, the nature of the acquired company’s
business; its competitive position, strengths, and challenges; its historical financial position and performance; estimated customer retention rates;
discount rates; and future plans for the combined entity. We may also engage independent valuation specialists, when necessary, to assist in the fair
value calculations for significant acquired long-lived assets.
The fair value of acquired technology is generally the primary asset identified and therefore estimated using the multi-period excess earnings method.
The multi-period excess earnings method model estimates revenues and cash flows derived from the primary asset and then deducts portions of the cash
flow that can be attributed to supporting assets, such as Trade Names and in-process research and development, that contributed to the generation of the
cash flows. The resulting cash flow, which is attributable solely to the primary asset acquired, is then discounted at a rate of return commensurate with
the risk of the asset to calculate a present value. The Trade Name is generally calculated using the relief from royalty method, which calculates the cost
savings associated with owning rather than licensing the technology. Assumed royalty rates are applied to the projected revenues for the remaining
useful life of the technology to estimate the royalty savings. In-process research and development assets are valued using the multi-period excess
earnings method when the cash flows from the in-process research and development assets are separately identifiable from the primary asset. In
circumstances that Customer Relationship assets are identified that are not the primary asset, they are valued using the distributor model income
approach, which isolates revenues and cash flow associated with the sales and distribution function of the entity and attributable to customer-related
assets, which are then discounted at a rate of return commensurate with the risk of the asset to calculate a present value.
We estimate the fair value of liabilities for contingent consideration by discounting to present value the probability weighted contingent payments
expected to be made. For potential payments related to financial performance based milestones, projected revenue and/or EBITDA amounts, volatility
and discount rates assumptions are included in the estimated amounts. For potential payments related to product development milestones, the fair value
is based on the probability of achievement of such milestones. The excess of the purchase price over the estimated fair value of the net assets acquired is
recorded as goodwill. Goodwill is not amortized, but is subject to impairment testing on at least an annual basis.
We are also required to estimate the useful lives of the acquired intangible assets, which determines the amount of acquisition-related amortization
expense we will record in future periods. Each reporting period, we evaluate the remaining useful lives of our amortizable intangibles to determine
whether events or circumstances warrant a revision to the remaining period of amortization.
While we use our best estimates and assumptions, our fair value estimates are inherently uncertain and subject to refinement. As a result, during the
measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed,
with the corresponding offset to goodwill. Any adjustments required after the measurement period are recorded in the consolidated statements of
earnings.
The judgments required in determining the estimated fair values and expected useful lives assigned to each class of assets and liabilities acquired can
significantly affect net income. For example, different classes of assets will have useful lives that differ. Consequently, to the extent a longer-lived asset
is ascribed greater value than a shorter-lived asset, net income
42 in a given period may be higher. Additionally, assigning a lower value to amortizable intangibles would result in a higher amount assigned to goodwill.
As goodwill is not amortized, this would benefit net income in a given period, although goodwill is subject to annual impairment analysis.
Impairment of Goodwill
Goodwill
Goodwill was $872.7 million as of June 30, 2023, which represented 33% of total assets. Goodwill is tested for impairment on an annual basis in the
fourth quarter of each year, or more frequently if events occur or circumstances change that could indicate a possible impairment.
To analyze goodwill for impairment, we must assign our goodwill to individual reporting units. Identification of reporting units includes an analysis of
the components that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and
the availability of discrete financial information. Components of an operating segment are aggregated to form one reporting unit if the components have
similar economic characteristics. We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our
business.
The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation for goodwill
is an assessment of factors including reporting unit specific operating results as well as industry and market conditions, overall financial performance,
and other relevant events and factors to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying
amount, including goodwill. The Company may elect to bypass the qualitative assessment for its reporting units and perform a quantitative test.
The quantitative impairment test requires us to estimate the fair value of our reporting units based on the income approach. The income approach is a
valuation technique under which we estimate future cash flows using the reporting unit’s financial forecast from the perspective of an unrelated market
participant. Using historical trending and internal forecasting techniques, we project revenue and apply our fixed and variable cost experience rate to the
projected revenue to arrive at the future cash flows. A terminal value is then applied to the projected cash flow stream. Future estimated cash flows are
discounted to their present value to calculate the estimated fair value. The discount rate used is the value-weighted average of our estimated cost of
capital derived using both known and estimated customary market metrics. In determining the estimated fair value of a reporting unit, we are required to
estimate a number of factors, including projected operating results, terminal growth rates, economic conditions, anticipated future cash flows, the
discount rate and the allocation of shared or corporate items.
For fiscal 2023, we elected to perform a qualitative analysis for all five reporting units. The Company determined, after performing the qualitative
analysis, there was no evidence that it is more likely than not that the fair value was less than the carrying amounts, therefore, it was not necessary to
perform a quantitative impairment test in fiscal 2023. The Company did not identify any triggering events after our annual goodwill impairment analysis
through June 30, 2023, the date of our consolidated balance sheet, that would require an additional goodwill impairment assessment to be performed.
In the first quarter of fiscal 2022, the Company combined the management of the Exosome Diagnostics and Asuragen reporting units, both of which are
included in the Diagnostics and Genomics operating segment. In conjunction with the combination of the reporting units, a qualitative goodwill
impairment assessment was performed. The qualitative assessment identified no indicators of impairment.
In the second quarter of fiscal 2022 Eminence notified the Company of its need for additional capital to execute its growth plan. The Company first
attempted to find outside equity financing support for the Eminence investment but was unable to do so. The Company then reviewed the additional
financing needs required to successfully ramp Eminence’s business, which ultimately did not meet the Company’s return on capital requirements.
Therefore, the Company did not provide additional funding to Eminence. As a result of not obtaining additional financing, Eminence notified the
Company of its plans to cease operations and liquidate its business.
Given the upcoming liquidation process to dispose of the Eminence assets, the Company identified a triggering event and performed impairment testing
during the second quarter of fiscal 2022. The impairment testing resulted in a full
43 impairment of the Eminence goodwill and intangible assets, which resulted in charges of $8.3 million and $8.6 million, respectively, for the year ended
June 30, 2022. The Company also recognized inventory and fixed asset impairment charges of $0.9 million and $0.9 million, respectively. The
Company recorded the impairment charges within the General and Administrative line in the Consolidated Income Statement. The impairment charges
recorded within Net Earnings Attributable to Bio-Techne were reduced by approximately $8 million recorded within Net Earnings Attributable to
Noncontrolling Interests. The remaining net tangible assets of Eminence included in our Consolidated Balance Sheet as of June 30 2022, were $4.3
million and primarily consisted of fixed assets and related deposits of $3.1 million, inventory of $0.6 million, receivables of $0.4 million, and other
current assets of $0.1 million. The Company also had $4.5 million related to current liabilities. The Company held a financial interest of approximately
57.4% in those tangible assets in the liquidation process. As described in Note 1, in the fourth quarter of fiscal 2022, Eminence was able to secure cash
deposits on future orders to provide funding for their operations. This delay in liquidation allowed time for securing of additional investor financing
which coincided with the sale of the Company's equity shares of Eminence in the first quarter of fiscal 2023.
In our fiscal 2022 annual goodwill impairment analysis, we elected to perform a quantitative assessment for all five of our reporting units. The result of
our quantitative assessment indicated that all of the reporting units had a substantial amount of headroom as of April 1, 2022. The Company did not
identify any triggering events after our annual goodwill impairment through June 30, 2022, the date of our consolidated balance sheet, that would
require an additional goodwill impairment assessment to be performed.
In fiscal 2021, because our 2021 quantitative analyses included all of our reporting units, the summation of our reporting units’ fair values, as indicated
by our discounted cash flow calculations, were compared to our consolidated fair value, as indicated by our market capitalization, to evaluate the
reasonableness of our calculations. This impairment assessment is sensitive to changes in forecasted cash flows, as well as our selected discount rate.
Changes in the reporting unit’s results, forecast assumptions and estimates could materially affect the estimation of the fair value of the reporting units.
The quantitative assessment completed as of April 1, 2021 indicated that all of the reporting units had a substantial amount of headroom. Accordingly,
the Company determined there was no indication of impairment of goodwill in our annual goodwill impairment analysis. Further, no triggering events
were identified in the year ended June 30, 2021 that would require an additional goodwill impairment assessment beyond our required annual goodwill
impairment assessment.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding the accounting policies adopted during fiscal 2023 and those not yet adopted can be found under caption “Note 1: Description of
Business and Summary of Significant Accounting Policies” of the Notes to the Consolidated Financial Statements appear in Item 8 of this report.
SUBSEQUENT EVENTS
On July 7, 2023, the Company completed the acquisition of Lunaphore Technologies SA for approximately $165 million, net of cash acquired.
NON-GAAP FINANCIAL MEASURES
This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7,
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 gross margin
● Adjusted operating margin
● Adjusted net earnings
● Adjusted effective tax rate
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
44 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. Revenue 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. Revenue from partially-owned subsidiaries was $2.0 million for the year ended June 30, 2023.
Our non-GAAP financial measures for adjusted gross margin, adjusted operating margin, 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, gain and losses from
investments, as they are not part of our day-to-day operating decisions (excluding our equity method investment in Wilson Wolf as it is certain to be
acquired in the future), and certain adjustments to income tax expense. Additionally, gains and losses from 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.
The Company periodically reassesses the components of our non-GAAP adjustments for changes in how we evaluate our performance, changes in how
we make financial and operational decisions, and considers the use of these measures by our competitors and peers to ensure the adjustments are still
relevant and meaningful.
Readers are encouraged to review the reconciliations of the adjusted financial measures used in management’s discussion and analysis of the financial
condition of the Company to their most directly comparable GAAP financial measures provided within the Company’s consolidated financial
statements.
45 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company operates internationally, and thus is subject to potentially adverse movements in foreign currency exchange rates. Approximately 37% of
the Company’s consolidated net sales in fiscal 2023 were made in foreign currencies, including 13% in euro, 5% in British pound sterling, 6% in
Chinese yuan, 3% in Canadian dollars, and the remaining 10% in other currencies. The Company is exposed to market risk primarily from foreign
exchange rate fluctuations of the euro, British pound sterling, Chinese yuan and Canadian dollar as compared to the U.S. dollar as the financial position
and operating results of the Company’s foreign operations are translated into U.S. dollars for consolidation.
Month-end exchange rates between the euro, British pound sterling, Chinese yuan, Canadian dollar and the U.S. dollar, which have not been weighted
for actual sales volume in the applicable months in the periods, were as follows:
Euro
High
Low
Average
British pound sterling
High
Low
Average
Chinese yuan
High
Low
Average
Canadian dollar
High
Low
Average
Year Ended June 30,
2022
2021
2023
$
$
$
$
$
$
$
$
1.10
0.98
1.05
1.27
1.11
1.21
0.15
0.14
0.14
0.78
0.73
0.74
$
$
$
$
1.19
1.05
1.12
1.39
1.21
1.32
0.16
0.15
0.15
0.81
0.78
0.79
1.23
1.16
1.20
1.42
1.29
1.35
0.16
0.14
0.15
0.83
0.75
0.78
The Company’s exposure to foreign exchange rate fluctuations also arises from trade receivables and intercompany payables denominated in one
currency in the financial statements, but receivable or payable in another currency.
The Company does not enter into foreign currency forward contracts to reduce its exposure to foreign currency rate changes on forecasted intercompany
sales transactions or on intercompany foreign currency denominated balance sheet positions. Foreign currency transaction gains and losses are included
in "Other non-operating expense, net" in the Consolidated Statement of Earnings and Comprehensive Income. The effect of translating net assets of
foreign subsidiaries into U.S. dollars are recorded on the Consolidated Balance Sheet as part of "Accumulated other comprehensive income (loss)."
The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from June 30, 2023 levels against the euro, British pound sterling,
Chinese yuan and Canadian dollar are as follows (in thousands):
Decrease in translation of earnings of foreign subsidiaries
Decrease in translation of net assets of foreign subsidiaries
Additional transaction losses
$
10,101
90,354
4,593
46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Bio-Techne Corporation and Subsidiaries
(in thousands, except per share data)
Net sales
Cost of sales
Gross margin
Operating expenses:
Selling, general and administrative
Research and development
Total operating expenses
Operating income
Other income (expense)
Interest expense
Interest income
Other non-operating income (expense), net
Total other income (expense), net
Earnings before income taxes
Income taxes (benefit)
Net earnings, including noncontrolling interest
Net earnings (loss) attributable to noncontrolling interest
Net earnings attributable to Bio-Techne
Other comprehensive income (loss):
Foreign currency translation adjustments
Foreign currency translation reclassified to earnings with Eminence deconsolidation
Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts
disclosed in Note 8
Other comprehensive income (loss)
Other comprehensive income (loss) attributable to noncontrolling interest
Other comprehensive income (loss) attributable to Bio-Techne
Comprehensive income attributable to Bio-Techne
Earnings per share attributable to Bio-Techne(1):
Basic
Diluted
Weighted average common shares outstanding(1):
Basic
Diluted
Year Ended June 30,
2022
2023
2021
$
1,136,702 $
366,887
769,815
1,105,599 $
349,103
756,496
931,032
298,182
632,850
378,378
92,493
470,871
298,944
372,766
87,140
459,906
296,590
324,951
70,603
395,554
237,296
(11,215)
3,410
47,520
39,715
338,659
53,217
285,442
179
285,263 $
(11,309)
794
15,311
4,796
301,386
38,287
263,099
(8,952)
272,051 $
(13,952)
473
(75,642)
(89,121)
148,175
8,590
139,585
(825)
140,410
4,191
119
(32,241)
—
32,951
—
4,793
9,103
(33)
9,136
294,399 $
14,262
(17,979)
(70)
(17,909)
254,142 $
7,060
40,011
103
39,908
180,318
1.81 $
1.76 $
1.73 $
1.66 $
0.91
0.87
157,179
161,855
156,874
164,114
154,986
161,932
$
$
$
$
(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 Consolidated Financial Statements.
47
CONSOLIDATED BALANCE SHEETS
Bio-Techne Corporation and Subsidiaries
(in thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents
Short-term available-for-sale investments
Accounts receivable, less allowance for doubtful accounts of $4,738 and $2,568, respectively
Inventories
Other current assets
Total current assets
Property and equipment, net
Right of use asset
Goodwill
Intangible assets, net
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
Salaries, wages and related accruals
Accrued expenses
Contract liabilities
Income taxes payable
Operating lease liabilities - current
Contingent consideration payable
Current portion of long-term debt obligations
Other current liabilities
Total current liabilities
Deferred income taxes
Long-term debt obligations
Long-term contingent consideration payable
Operating lease liabilities
Other long-term liabilities
Bio-Techne’s Shareholders’ equity:
$
$
$
June 30,
2023
2022
$
$
$
180,571
23,739
218,468
171,638
27,066
621,482
226,200
98,326
872,737
534,645
285,302
2,638,692
25,679
36,747
14,880
23,069
12,022
11,199
3,500
—
1,413
128,509
88,982
350,000
—
93,766
10,919
172,567
74,462
194,548
141,123
22,856
605,556
223,242
65,556
822,101
531,522
46,828
2,294,805
33,865
61,953
17,886
23,406
13,237
11,928
—
12,500
1,243
176,018
98,994
243,410
5,000
58,133
12,239
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 157,641,914 and 156,644,212,
respectively(1)
Additional paid-in capital(1)
Retained earnings(1)
Accumulated other comprehensive loss
Total Bio-Techne’s shareholders’ equity
Noncontrolling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
—
—
1,576
721,543
1,309,461
(66,064)
1,966,516
—
1,966,516
2,638,692
$
$
1,566
652,467
1,122,937
(75,200)
1,701,770
(759)
1,701,011
2,294,805
(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 Consolidated Financial Statements.
48
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Bio-Techne Corporation and Subsidiaries
(in thousands)
Common Stock
Shares(1)
153,812
Amount(1)
1,538
$
Additional
Paid-in
Capital(1)
$
419,383
$
Retained
Earnings(1)
1,057,470
Accumulated
Other
Comprehensive
Income(Loss)
Noncontrolling
Interest
$
(97,199)
$
— $
Balances at June 30, 2020
Cumulative effect adjustments due to adoption of new
accounting standards and other
Non-controlling interest in Eminence
Net earnings
Other comprehensive income (loss)
Share repurchases
Common stock issued for exercise of options
Common stock issued for restricted stock awards
Cash dividends
Stock-based compensation expense
Common stock issued to employee stock purchase
plan
Employee stock purchase plan expense
(480)
2,293
153
44
(5)
23
2
0
Balances at June 30, 2021
155,822
$
1,558
$
Net earnings
Other comprehensive income (loss)
Share repurchases
Common stock issued for exercise of options
Common stock issued for restricted stock awards
Cash dividends
Stock-based compensation expense
Common stock issued to employee stock purchase
plan
Employee stock purchase plan expense
(1,577)
2,282
89
(16)
23
1
28
0
Balances at June 30, 2022
156,644
$
1,566
$
Reclassification of cumulative translation adjustment
for Eminence to non-operating income
Elimination of noncontrolling equity interest from sale
of Eminence
Net earnings
Other comprehensive income (loss)
Share repurchases
Common stock issued for exercise of options
Common stock issued for restricted stock awards
Cash dividends
Stock-based compensation expense
Common stock issued to employee stock purchase
plan
Employee stock purchase plan expense
(222)
1,083
63
74
(2)
10
1
1
Balances at June 30, 2023
157,642
$
1,576
$
(276)
140,410
(43,173)
(12,287)
(7,057)
(49,622)
39,908
8,985
(825)
103
$
1,085,465
272,051
$
(57,291)
$
(17,909)
$
8,263
(8,952)
(70)
(160,934)
(13,482)
(9,978)
(50,185)
$
1,122,937
$
(75,200)
$
(759)
$
152
8,984
(33)
613
179
285,263
(19,560)
(22,163)
(6,731)
(50,285)
$
1,309,461
$
(66,064)
$
— $
62,085
(2)
48,065
2,791
917
533,239
74,354
(1)
41,208
2,694
973
652,467
24,942
(1)
38,315
4,905
915
721,543
Total
1,381,192
(276)
8,985
139,585
40,011
(43,178)
49,821
(7,057)
(49,622)
48,065
2,791
917
1,571,234
263,099
(17,979)
(160,950)
60,895
(9,978)
(50,185)
41,208
2,694
973
1,701,011
119
613
285,442
8,984
(19,562)
2,789
(6,731)
(50,285)
38,315
4,906
915
1,966,516
(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 Consolidated Financial Statements.
49
CONSOLIDATED STATEMENTS OF CASH FLOWS
Bio-Techne Corporation and Subsidiaries
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings, including noncontrolling interest
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Costs recognized on sale of acquired inventory
Deferred income taxes
Stock-based compensation expense
Fair value adjustment to contingent consideration payable
Contingent consideration payments - operating
Gain on sale of CCXI investment
Fair value adjustment on available-for-sale investments
(Gain) loss on equity method investment
Asset impairment restructuring
Eminence impairment
Gain on sale of Eminence
Leases, net
Other operating activity
Change in operating assets and operating liabilities, net of acquisition:
Trade accounts and other receivables, net
Inventories
Prepaid expenses
Trade accounts payable, accrued expenses, contract liabilities, and other
Salaries, wages and related accruals
Income taxes payable
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of available-for-sale investments
Purchases of available-for-sale investments
Proceeds from sale of CCXI investment
Additions to property and equipment
Acquisitions, net of cash acquired
Investment in unconsolidated entity, net
Proceeds from sale of Eminence
Investment of forward purchase contract
Investment in Wilson Wolf
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends
Proceeds from stock option exercises
Re-purchases of common stock
Borrowings under line-of-credit agreement
Repayments of long-term debt
Contingent consideration payments - financing
Taxes paid on RSUs and net share settlements
Other financing activity
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
2023
Year Ended June 30,
2022
2021
$
285,442 $
263,099 $
107,238
400
(29,567)
39,230
(12,100)
—
(37,176)
(472)
1,143
—
—
(11,682)
2,059
455
(20,867)
(30,167)
(4,585)
(7,908)
(24,558)
(2,492)
254,393
35,236
(20,500)
73,219
(38,244)
(101,184)
—
17,824
—
(232,000)
(265,649)
(50,285)
29,813
(19,562)
619,661
(525,661)
—
(28,893)
(2,457)
22,616
(3,356)
8,004
172,567
180,571 $
101,069
1,596
6,816
42,183
(20,400)
(3,300)
—
(15,002)
—
546
18,715
—
(1,201)
668
(57,596)
(32,007)
(3,082)
12,741
7,760
2,667
325,272
26,055
(52,998)
—
(44,908)
—
—
—
(25,000)
—
(96,851)
(50,185)
77,155
(160,950)
90,000
(175,500)
(700)
(23,461)
788
(242,853)
(12,092)
(26,524)
199,091
172,567 $
$
139,585
87,747
1,565
(27,431)
48,982
5,300
(337)
—
67,879
—
—
—
—
75
(464)
(15,549)
(7,140)
(1,101)
19,091
20,536
13,426
352,164
66,377
(39,684)
—
(44,301)
(225,352)
(556)
—
—
—
(243,516)
(49,622)
65,092
(43,178)
256,000
(271,500)
—
(19,343)
—
(62,551)
6,369
52,466
146,625
199,091
See Notes to Consolidated Financial Statements.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bio-Techne Corporation and Subsidiaries
Years ended June 30, 2023, 2022 and 2021
Note 1. Description of Business and Summary of Significant Accounting Policies:
Description of business: Bio-Techne and its subsidiaries, collectively doing business as Bio-Techne Corporation (the Company), develop, manufacture
and sell life science reagents, instruments and services for the research and clinical diagnostic markets worldwide. With our deep product portfolio and
application expertise, we sell integral components of scientific investigations into biological processes and molecular diagnostics, revealing the nature,
diagnosis, etiology and progression of specific diseases. Our products aid in drug discovery efforts and provide the means for accurate clinical tests and
diagnoses.
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.
Use of estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent
assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
These estimates include the valuation of accounts receivable, available-for-sale investments, inventory, intangible assets, contingent consideration,
stock-based compensation and income taxes. Actual results could differ from these estimates.
Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All
intercompany accounts and transactions have been eliminated. As Eminence met the criteria for consolidation, the transaction was accounted for in
accordance with ASC 805, Business Combinations. In applying ASC 805 to the transaction, the Company has elected to include Eminence in our
consolidated financial statements on a one month lag. As noted below, Eminence was sold during the first fiscal quarter of 2023.
Translation of foreign financial statements: Assets and liabilities of the Company’s foreign operations are translated at year-end rates of exchange and
the resulting gains and losses arising from the translation of net assets located outside the U.S. are recorded as other comprehensive income (loss) on the
consolidated statements of earnings and comprehensive income. The cumulative translation adjustment is a component of accumulated other
comprehensive loss on the consolidated balance sheets. Foreign statements of earnings are translated at the average rate of exchange for the year.
Foreign currency transaction gains and losses are included in other non-operating expense in the consolidated statements of earnings and comprehensive
income.
Revenue recognition: ASC 606 provides revenue recognition guidance for any entity that enters into contracts with customers to transfer goods or
services or enters into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other accounting standards. The
core principle of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Refer to Note 2 for additional information
regarding our revenue recognition policy under ASC 606.
Research and development: Research and development expenditures are expensed as incurred. Development activities generally relate to creating new
products, improving or creating variations of existing products, or modifying existing products to meet new applications.
Advertising costs: Advertising expenses were $4.8 million, $4.6 million, and $4.7 million for fiscal 2023, 2022, and 2021 respectively. The Company
expenses advertising expenses as incurred.
51 Income taxes: The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized to
record the income tax effect of temporary differences between the tax basis and financial reporting basis of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. Tax positions taken or expected to be taken in a tax return are recognized in the financial statements when it is more likely than not that
the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is
greater than fifty percent likely of being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax
benefits in income tax expense. Refer to Note 12 for additional information regarding income taxes.
Comprehensive income: Comprehensive income includes charges and credits to shareholders’ equity that are not the result of transactions with
shareholders. Our total comprehensive income consists of net income, unrealized gains and losses on cash flow hedges, and foreign currency translation
adjustments. The items of comprehensive income, with the exception of net income, are included in accumulated other comprehensive loss in the
consolidated balance sheets and statements of shareholders’ equity.
Cash and cash equivalents: Cash and cash equivalents include cash on hand and highly-liquid investments with original maturities of three months or
less.
Available-for-sale investments: Available-for-sale investments consist of debt instruments with original maturities of generally three months to
six months and equity securities. Available-for-sale investments are recorded based on trade-date. The Company considers all of its marketable
securities available-for-sale and reports them at fair value. Unrealized gains and losses on our available-for-sale securities are included within other
income (expense).
Trade accounts receivable and allowances: Trade accounts receivable are initially recorded at the invoiced amount upon the sale of goods or services to
customers, and they do not bear interest. They are stated net of allowances for doubtful accounts, which represent estimated losses resulting from the
inability of customers to make the required payments. When determining the allowances for doubtful accounts, we take several factors into
consideration, including the overall composition of accounts receivable aging, our prior history of accounts receivable write-offs, the type of customer
and our day-to-day knowledge of specific customers. Changes in the allowances for doubtful accounts are included in selling, general and administrative
(SG&A) expense in our consolidated statements of earnings and comprehensive income. The point at which uncollected accounts are written off varies
by type of customer. The Company does not have material long-term customer receivables.
Inventories: Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. The Company regularly reviews inventory on
hand for slow-moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration.
For certain proteins, antibodies, and chemically based manufactured products, the Company produces larger batches of established products than current
sales requirements due to economies of scale through a highly controlled manufacturing process. Accordingly, the manufacturing process for these
products has and will continue to produce quantities in excess of forecasted usage. The Company forecasts usage for its products based on several
factors including historical demand, current market dynamics, and technological advances. The Company forecasts product usage on an individual
product level for a period that is consistent with our ability to reasonably forecast inventory usage for that product. There have been no material changes
to the Company’s estimates of the net realizable value for excess and obsolete inventory or other types of inventory reserves and inventory cost
adjustments in the fiscal years presented. Additionally, current and historical reserves recorded to reduce the cost of inventory to its net realizable value
become part of the new cost basis for the inventory item in accordance with ASC 330 - Inventory.
Property and equipment: Property and equipment are recorded at cost. Equipment is depreciated using the straight-line method over an estimated useful
life of 3 to 5 years. Buildings, building improvements and leasehold improvements are amortized over estimated useful lives of 5 to 40 years.
52 Contingent Consideration: Contingent Consideration relates to the potential payment for an acquisition that is contingent upon the achievement of the
acquired business meeting certain product development milestones and/or certain
financial performance milestones. The Company
records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred. For potential payments
related to financial performance milestones, we use a real option model in calculating the fair value of the contingent consideration
liabilities. The assumptions utilized in the calculation based on financial performance milestones include projected revenue and/or EBITDA amounts,
volatility and discount rates. For potential payments related to product development milestones, we estimated the fair value based on the probability of
achievement of such milestones. The assumptions utilized in the calculation of the acquisition date fair value include probability of success and the
discount rates. Contingent consideration involves certain assumptions requiring significant judgment and actual results may differ from assumed and
estimated amounts. Contingent consideration is remeasured each reporting period, and subsequent changes in fair value, including accretion for the
passage of time, are recognized within selling, general and administrative in the consolidated statement of earnings and comprehensive income.
Intangible assets: Intangible assets are stated at historical cost less accumulated amortization. Amortization expense is generally determined on the
straight-line basis over periods ranging from 1 year to 20 years. Each reporting period, we evaluate the remaining useful lives of our amortizable
intangibles to determine whether events or circumstances warrant a revision to the remaining period of amortization. If our estimate of an asset’s
remaining useful life is revised, the remaining carrying amount of the asset is amortized prospectively over the revised remaining useful life.
Given the anticipated liquidation process to dispose of the Eminence assets, the Company identified a triggering event in the second quarter of fiscal
2022 and performed impairment testing. The impairment testing resulted in a full impairment of the Eminence intangible assets. Refer to the Impairment
of Goodwill section as part of Note 1 for further details related to the triggering event and related impairment recorded.
In conjunction with the Asuragen acquisition that occurred in fiscal year 2021, the Company reassessed the useful life of a tradename from a previous
acquisition due to the planned integration and cobranding strategy developed with the most recent transaction. As a result, the Company accelerated the
amortization of the trade name to be consistent with the life used for the Asuragen trade name. The accelerated amortization resulted in a $1.4 million
impact in fiscal 2021, a $5.7 million impact in fiscal years 2022 through 2025, and a $4.3 million impact in fiscal year 2026.
Impairment of long-lived assets and amortizable intangibles: We evaluate the recoverability of property, plant, equipment and amortizable intangibles
whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but
are not limited to, (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is
used or in its physical condition, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or
construction of an asset. We compare the carrying amount of the asset to the estimated undiscounted future cash flows associated with it. If the sum of
the expected future net cash flows is less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment
loss would be calculated as the amount by which the carrying value of the asset exceeds the fair value of the asset. As quoted market prices are not
available for the majority of our assets, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated
future cash flows.
The evaluation of asset impairment requires us to make assumptions about future cash flows over the life of the asset being evaluated. These
assumptions require significant judgment and actual results may differ from assumed and estimated amounts. No other triggering events were identified
and no other impairments were recorded for property, plant, and equipment or amortizable intangibles during fiscal years 2023, 2022, and 2021.
Impairment of goodwill and indefinite-lived intangible assets: We evaluate the carrying value of goodwill and indefinite-lived intangible assets during
the fourth quarter each year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. Such
circumstances could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition,
(3) an adverse action or assessment by a regulator, or (4) an adverse change in market conditions that are indicative of a decline in the fair value of the
assets.
53 To analyze goodwill, we must assign our goodwill to individual reporting units. Identification of reporting units includes an analysis of the components
that comprise each of our operating segments, which considers, among other things, the manner in which we operate our business and the availability of
discrete financial information. Components of an operating segment are aggregated to form one reporting unit if the components have similar economic
characteristics. We periodically review our reporting units to ensure that they continue to reflect the manner in which we operate our business. The
Company had five reporting units for our 2023, 2022, and 2021 goodwill impairment assessment performed on April 1 of each of the respective fiscal
years, the date of our annual goodwill impairment assessment.
The Company tests goodwill for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation for goodwill
is an assessment of factors including reporting unit specific operating results as well as industry and market conditions, overall financial performance,
and other relevant events and factors to determine whether it is more likely than not that the fair values of a reporting unit is less than its carrying
amount, including goodwill. The Company may elect to bypass the qualitative assessment for its reporting units and perform a quantitative test.
The quantitative impairment test requires us to estimate the fair value of our reporting units based the income approach. The income approach is a
valuation technique under which we estimate future cash flows using the reporting unit’s financial forecast from the perspective of an unrelated market
participant. Using historical trending and internal forecasting techniques, we project revenue and apply our fixed and variable cost experience rate to the
projected revenue to arrive at the future cash flows. A terminal value is then applied to the projected cash flow stream. Future estimated cash flows are
discounted to their present value to calculate the estimated fair value. The discount rate used is the value-weighted average of our estimated cost of
capital derived using both known and estimated customary market metrics. In determining the estimated fair value of a reporting unit, we are required to
estimate a number of factors, including projected operating results, terminal growth rates, economic conditions, anticipated future cash flows, the
discount rate and the allocation of shared or corporate items.
For fiscal 2023, we elected to perform a qualitative analysis for all five reporting units. The Company determined, after performing the qualitative
analysis, there was no evidence that it is more likely than not that the fair value was less than the carrying amounts, therefore, it was not necessary to
perform a quantitative impairment test in fiscal 2023. The Company did not identify any triggering events after our annual goodwill impairment analysis
through June 30, 2023, the date of our consolidated balance sheet, that would require an additional goodwill impairment assessment to be performed.
For fiscal 2023, the Company also performed a qualitative assessment of the acquired in-process research and development assets to determine whether
changes in events, circumstances, or the probability of successful development and commercialization of the assets indicated that it is more likely than
not that the fair value of the acquired assets are less than its carrying amount. Based on the analysis, the Company determined there was no indication
of impairment of the indefinite-lived intangible assets.
On September 1, 2022, the Company completed the sale of its equity shares of 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. Fiscal 2022 revenues were $4.6 million. 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 Consolidated Statement of Earnings. Prior to the sale of
Eminence, a triggering event was identified in the second quarter of fiscal 2022 and impairment testing was performed as Eminence was forecasted to
not have sufficient cash to execute on their growth plan combined with their inability to secure additional financing. Our impairment testing resulted in a
full impairment of the Eminence goodwill and intangibles assets for charges of $8.3 million and $8.6 million, respectively, for the year ended June 30,
2022. The Company also recognized inventory and fixed asset impairment charges of $0.9 million and $0.9 million, respectively. These impairment
charges were recorded within the General and Administrative line in the Consolidated Statement of Earnings for fiscal 2022. In the fourth quarter of
fiscal 2022, Eminence was able to secure cash deposits on future orders to provide funding for their operations. This delay in liquidation allowed time
for securing of additional investor financing which coincided with the sale of the Company's investment.
In the first quarter of fiscal 2022, the Company combined the management of the Exosome Diagnostics and Asuragen reporting units, both of which are
included in the Diagnostics and Genomics operating segment. In conjunction with the
54 combination of the reporting units, a qualitative goodwill impairment assessment was performed. The qualitative assessment identified no indicators of
impairment.
In our fiscal 2022 annual goodwill impairment analysis, we elected to perform a quantitative assessment for all five of our reporting units. The result of
our quantitative assessment indicated that all of the reporting units had a substantial amount of headroom as of April 1, 2022. The Company did not
identify any triggering events after our annual goodwill impairment through June 30, 2022, the date of our consolidated balance sheet, that would
require an additional goodwill impairment assessment to be performed.
In fiscal 2021, because our 2021 quantitative analyses included all of our reporting units, the summation of our reporting units’ fair values, as indicated
by our discounted cash flow calculations, were compared to our consolidated fair value, as indicated by our market capitalization, to evaluate the
reasonableness of our calculations. This impairment assessment is sensitive to changes in forecasted cash flows, as well as our selected discount rate.
Changes in the reporting unit’s results, forecast assumptions and estimates could materially affect the estimation of the fair value of the reporting units.
The quantitative assessment completed as of April 1, 2021 indicated that all of the reporting units had a substantial amount of headroom. Accordingly,
the Company determined there was no indication of impairment of goodwill in our annual goodwill impairment analysis. Further, no triggering events
were identified in the year ended June 30, 2021 that would require an additional goodwill impairment assessment beyond our required annual goodwill
impairment assessment.
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 if certain annual revenue or annual 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 and included within our consolidated financials on a
one month lag. 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. For the year ended June 30, 2023, there was $1.1 million of loss recorded on the
Company’s Consolidated Statement of Earnings and Comprehensive Income related to the investment. The Company’s total investment of $256 million
as of June 30, 2023 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.
55 Fiscal Year 2023 Restructuring Actions:
QT Holdings Corporation (Quad)
In August 2022, the Company informed employees of our decision to close our 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, an estimated pre-
tax charge of $2.2 million was recorded within our Protein Sciences segment for the year ended June 30, 2023. The related restructuring charges for the
year ended June 30, 2023 were recorded in the income statement as follows (in thousands):
Selling, general and administrative
Expense incurred in the first quarter of 2023
Cash payments
Adjustments
Accrued restructuring actions balances as of June 30, 2023
Protein Sciences realignment
Employee
severance
Asset
impairment and other
Total
1,328
$
842
$
2,170
Employee
severance
Asset
impairment and other
$
1,328
(1,233)
(95)
— $
$
842
(772)
(70)
— $
Total
2,170
(2,005)
(165)
—
$
$
$
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 first 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):
Expense incurred in the second quarter of 2023
Expense incurred in the fourth quarter of 2023
Cash payments
Adjustments
Accrued restructuring actions balances as of June 30, 2023
Fiscal Year 2022 Restructuring Actions:
Employee
severance
780
897
(762)
(18)
897
$
$
In September 2021, the Company informed employees of our decision to close our Exosome Diagnostics Germany facility, discontinuing lab and
research occurring at the site, as part of a realignment of activities within our Exosome Diagnostics business. The restructuring activities were complete
as of June 30, 2022. As a result of the restructuring activities, a pre-tax charge of $1.4 million was recorded within our Diagnostics and Genomics
segment during the year ended June 30, 2022. Total restructuring charges for the closure of the Exosome Diagnostics Germany facility for the year
ended June 30, 2022 were recorded within operating income on the income statement as follows (in thousands):
Selling, general and administrative
Employee
Severance
Asset
Impairment and other
Total
$
649
$
750
$
1,399
56
Expense incurred in the first quarter of 2022
Incremental expense incurred during fiscal 2022
Cash payments
Adjustments(1)
Accrued restructuring actions balances as of June 30, 2022
Employee
Severance
Asset
Impairment and other
$
$
$
639
—
(589)
(50)
—
$
546
242
(554)
(234)
—
Total
1,185
242
(1,143)
(284)
—
(1) Adjustments include refinements to our estimated close down costs as well as the impacts from foreign currency exchange.
During the second quarter of fiscal 2022, the Company also incurred a restructuring charge of $0.2 million related to employee severance for the
relocation of a US plant. This was completed during fiscal 2023 and there are no remaining liabilities related to this relocation as of June 30, 2023. This
charge was recorded within Other current liabilities as of June 30, 2022. Fiscal 2023 cash payments did not materially differ from the charge recorded in
fiscal 2022.
Other Significant Accounting Policies
The following table includes a reference to additional significant accounting policies that are described in other notes to the financial statements,
including the note number:
Policy
Fair value measurements
Leases
Earnings per share
Share-based compensation
Operating segments
Recently Adopted Accounting Pronouncements
Note
5
7
9
10
13
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments. The amendment in this update replaced the previous incurred loss impairment methodology with a methodology that reflects expected
credit losses on financial instruments within its scope, including trade and loan receivables and available-for-sale debt securities. This update is intended
to provide financial statement users with more decision-useful information about the expected credit losses. The Company adopted this standard on July
1, 2020 using a modified retrospective transition approach with a cumulative impact of $0.3 million to retained earnings. The adoption of this ASU did
not have a material impact on the Company's financial statements as the Company's primary financial instruments impacted by the ASU were trade
accounts receivable, where we have high historical and expected future collections due to the length of receivables and the credit quality of our
customers.
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021
issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. These ASUs provide expedients and exceptions to existing guidance on contract
modifications and hedge accounting that is optional to facilitate the market transition from a reference rate, including LIBOR which was phased out
in 2021, to a new reference rate. The provisions of the ASUs impact contract modifications and other changes that occur while LIBOR is phased out.
The Company adopted the optional relief guidance provided within these ASUs in the fourth quarter of fiscal 2021. The Company’s current debt and
derivative instruments utilize SOFR as the reference rate. The adoption of the standard did not impact our financial results for fiscal 2022 or fiscal 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
57
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.
Prior to fiscal year 2021, the Company had not recognized revenue upon completion of the performance obligation for laboratory services, but rather
upon cash receipt, which was subsequent to the performance obligation being satisfied. The Company accounted for these services based on cash
receipts as we did not have significant historical experience collecting payments from Medicare or other insurance providers and considered the variable
consideration for such services to be constrained as it would not be probable that a significant amount of revenue would not need to be reversed in future
periods for the services provided. Given Medicare coverage for our laboratory services became effective on December 1, 2019, the Company considered
it to have sufficient data to estimate variable consideration as of July 1, 2020 for laboratory services that are reimbursed by Medicare. The amount of
cash received in fiscal 2021 for laboratory services reimbursed by Medicare that were performed prior to July 1, 2020 was approximately $0.5 million.
Prior to fiscal year 2023, the Company recorded revenue based on cash receipts for laboratory services not reimbursed by Medicare, as the variable
consideration was constrained since we did not have significant historical experience collecting payments not reimbursed by Medicare or other
insurance providers and it would not be probable that a significant amount of revenue would not need to be reversed in future periods for the services
provided. During the first half of fiscal 2022, we began to see an increase in claim volume due to strategic initiatives, including broader messaging
around the importance of cancer screenings during the COVID-19 pandemic, and the acute phase of the COVID-19 pandemic subsiding. Given these
factors, the Company considered it to have sufficient data to estimate variable consideration as of July 1, 2022 for laboratory services that are not
reimbursed by Medicare. The amount of cash received in fiscal 2023 for non-Medicare laboratory services that were performed prior to July 1, 2022
was approximately $0.9 million.
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 June 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 June 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 June 30, 2023 and June 30, 2022 were approximately $24.6 million and $25.5 million, respectively. Contract liabilities as of
June 30, 2022 subsequently recognized as revenue during the year ended June 30, 2023 were approximately $21.5 million. Contract liabilities in excess
of one year are included in Other long-term liabilities on the consolidated balance sheet.
58 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. The following tables present our disaggregated
revenue for the periods presented.
Revenue by type is as follows:
Consumables
Instruments
Services
Total product and services revenue, net
Royalty revenues
Total revenues, net
Revenue by geography is as follows:
United States
EMEA, excluding United Kingdom
United Kingdom
APAC, excluding Greater China
Greater China
Rest of World
Net Sales
Note 3. Supplemental Balance Sheet and Cash Flow Information:
Inventories:
Inventories consist of (in thousands):
Raw materials
Finished goods(1)
Inventories, net
Year ended June 30,
2022
2023
917,733
112,085
85,784
1,115,602
21,100
1,136,702
$
$
$
890,874
120,758
71,988
1,083,620
21,979
1,105,599
Year Ended June 30,
2022
2023
642,465
220,230
49,457
73,190
113,868
37,492
1,136,702
$
$
614,107
219,055
48,637
76,139
112,438
35,223
1,105,599
2021
751,985
93,782
66,416
912,183
18,849
931,032
2021
502,080
204,264
40,945
69,013
87,556
27,174
931,032
$
$
$
$
$
$
$
$
June 30,
2023
2022
$
$
84,551
92,474
177,025
$
$
79,291
66,943
146,234
(1) Finished goods inventory of $5,387 and $5,111 is included within other assets in the June 30, 2023 and June 30, 2022 Balance Sheets,
respectively, as it is forecasted to be sold after the 12 months subsequent to the consolidated balance sheet date.
59
Property and Equipment:
Property and equipment consist of (in thousands):
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Property and equipment, cost
Accumulated depreciation and amortization
Property and equipment, net
Intangibles assets were comprised of the following (in thousands):
Developed technology
Trade names
Customer relationships
Patents
Other intangibles
Definite-lived intangible assets
Accumulated amortization
Definite-lived intangibles assets, net
In process research and development
Total intangible assets, net
Changes to the carrying amount of net intangible assets consist of (in thousands):
Beginning balance
Acquisitions
Other additions(1)
Amortization expense
Currency translation
Eminence impairment
Ending balance
June 30,
2023
9,100
245,302
190,019
15,491
459,912
(233,712)
226,200
$
$
2022
8,572
229,551
174,813
21,729
434,665
(211,423)
223,242
$
$
Useful Life
(years)
June 30,
2023
2022
9 - 15
2 - 20
7 - 16
10
5 - 15
$
$
616,311
146,945
213,878
3,815
11,566
992,515
(480,570)
511,945
22,700
534,645
$
$
542,038
146,457
225,882
3,313
6,306
923,996
(415,174)
508,822
22,700
531,522
June 30,
2023
2022
$
$
531,522
75,600
5,710
(77,491)
(696)
—
534,645
$
$
615,968
—
293
(74,147)
(2,029)
(8,563)
531,522
(1)Includes the purchase of a $4.6 million intangible asset from Wilson Wolf, an equity method investee of the Company during the year-ended June 30,
2023. This asset will be amortized over a life of 10 years.
Amortization expense related to developed technologies included in cost of sales was $44.3 million, $40.6 million, and $36.5 million in fiscal 2023,
2022, and 2021, respectively. Amortization expense related to trade names, customer relationships, non-compete agreements, and patents included in
selling, general and administrative expense was $33.2 million, $33.5 million, and $28.4 million, in fiscal 2023, 2022, and 2021 respectively.
60
The estimated future amortization expense for intangible assets as of June 30, 2023, excluding any possible future amortization associated with acquired
in-process research and development (IPR&D) which has not met technological feasibility, is as follows (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
Goodwill:
Changes in goodwill by segment and in total consist of (in thousands):
June 30, 2021
Acquisitions
Eminence impairment
Currency translation
June 30, 2022
Acquisitions
Currency translation
June 30, 2023
Other Assets:
Other assets consist of (in thousands):
Investment in Wilson Wolf
Derivative instruments
Long-term inventory
Other
Other assets
Supplemental Cash Flow Information:
Supplemental cash flow information was as follows (in thousands):
Income taxes paid
Interest paid
Non-cash activities:
Acquisition-related liabilities (1)
Other intangibles (2)
$
$
75,331
72,056
68,089
57,920
54,470
184,079
511,945
Protein Sciences
Diagnostics and
Genomics
Total
$
$
$
392,717
—
(8,275)
(7,949)
376,493
51,257
(723)
427,027
$
$
$
450,350
(4,407)
—
(335)
445,608
—
102
445,710
$
$
$
843,067
(4,407)
(8,275)
(8,284)
822,101
51,257
(621)
872,737
June 30,
2023
2022
$
$
255,857
16,857
5,387
7,201
285,302
$
$
25,000
11,026
5,111
5,691
46,828
$
2023
88,428
8,368
12,100
Year Ended June 30,
2022
$
30,341
11,027
20,400
—
—
$
2021
20,952
13,576
23,600
4,000
(1) Consists of holdback payments due at future dates and liabilities for contingent consideration. Amounts disclosed above represent the total non-cash
change in the liability from the prior fiscal year. Further information regarding liabilities for contingent consideration can be found in Notes 4 and 5.
61
(2) $4.0 million of the third party patented technology acquired in fiscal 2021 was a non-cash activity within the consolidated statement of cash flows
as a cash payment was not made within the fiscal year ended June 30, 2021.
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 2023 Acquisitions
Namocell, Inc.
On July 1, 2022, the Company acquired all of the ownership interests of Namocell, Inc. for $101.2 million, net of cash acquired, plus contingent
consideration of up to $25 million upon the achievement of certain future revenue thresholds. The Namocell acquisition adds easy-to-use single cell
sorting and dispensing platforms that are gentle to cells and preserve cell viability and integrity. 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 Protein Sciences operating segment in the first quarter of fiscal year 2023.
The allocation of purchase price consideration related to Namocell, Inc was completed in the fourth quarter of fiscal 2023. Net sales and operating loss
of this business included in Bio-Techne's consolidated results of operations for the twelve months ended June 30, 2023 were approximately $6.4 million
and $9.3 million, respectively. The fair values of the assets acquired and liabilities assumed as of the acquisition date and the updated final amounts as
of June 30, 2023 are as follows (in thousands):
Preliminary allocation at acquisition
date
Adjustments to
fair value
Final allocation at
June 30, 2023
Current assets, net of cash
Equipment and other long-term assets
Intangible assets:
Developed technologies
Tradenames
Customer relationships
Non-competition agreement
Goodwill
Total assets acquired
Liabilities
Deferred income taxes, net
Net assets acquired
Cash paid, net of cash acquired
Contingent consideration payable
Net assets acquired
$
$
$
3,248
405
$
$
73,900
700
900
100
51,051
130,304
546
17,974
111,784
101,184
10,600
111,784
$
$
206
206
206
— $
— $
3,248
405
73,900
700
900
100
51,257
130,510
546
18,180
111,784
101,184
10,600
111,784
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 was based on management’s preliminary forecasted cash inflows and outflows and using a relief from royalty
method to calculate the fair value of assets purchased. The purchase price allocated to customer relationships and trade names was based on
management's preliminary forecasted
62
cash inflows and outflows and using a multiperiod excess earnings method. The amount recorded for developed technology is being amortized with the
expense reflected in Cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed
technology is estimated to be 13 years. Amortization expense related to customer relationships is reflected in Selling, general and administrative
expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be 4
years. The amount recorded for trade names and the non-competition agreement is being amortized with the expense reflected in Selling, general and
administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for both trade names and the
non-competition agreement is estimated to be 3 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.
There were no acquisitions in fiscal 2022.
Fiscal year 2021 Acquisitions
Eminence Biotechnology
On October 20, 2020, the Company acquired 47.6% of the outstanding equity shares of Eminence for approximately $9.8 million, net of cash acquired.
The fair value of the noncontrolling interest of $9.0 million included in the consolidated balance sheet was a non-cash activity within the statement of
cash flows. Eminence is considered a variable interest entity as it is an early stage biotechnology company that required additional funding through a
subsequent equity investment, which was used to fund Eminence’s expansion and GMP manufacturing capabilities within China. On April 2, 2021, the
Company invested approximately $6 million of additional funding into Eminence, increasing our percentage of outstanding equity shares to 57.4%. The
Company was considered the primary beneficiary at the time of initial acquisition given the Company was the largest shareholder coupled with its
ability to exercise significant influence over the entity.
As Eminence met the criteria for consolidation, the transaction was accounted for in accordance with ASC 805, Business Combinations. In applying
ASC 805 to the transaction, the Company has elected to include Eminence in our consolidated financial statements on a one month lag.
The goodwill recorded as 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 fair value of the noncontrolling interest in Eminence was calculated utilizing cash flow projections
discounted to the acquisition date and control premiums calculated using market data. Acquired goodwill is not deductible for income tax purposes. The
business became part of the Protein Sciences reportable segment in the second quarter of fiscal year 2021. Purchase accounting was finalized during
fiscal 2021.
63 Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management’s assessment. The purchase price allocated
to developed technology and customer relationships was based on management’s forecasted cash inflows and outflows and using a multiperiod excess
earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology is being amortized with the expense
reflected in cost of goods sold in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for developed
technology is estimated to be 13 years. Amortization expense related to customer relationships is reflected in selling, general and administrative
expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer relationships is estimated to be
10 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 calculation of acquired NOLs.
The Company identified a triggering event related to Eminence during the second quarter of fiscal 2022 and further sold our outstanding shares of
Eminence in the first quarter of fiscal 2023. Refer to Note 1 for further details relating to the triggering event and related impairment recorded as well as
the details of the sale.
Asuragen, Inc.
On April 6, 2021, the Company acquired all of the ownership interests of Asuragen, Inc. (Asuragen) for approximately $216 million, net of cash
acquired, plus contingent consideration of up to $105.0 million, subject to certain revenue thresholds. The goodwill recorded as a result of the
acquisition represents the strategic benefits of growing the Company’ 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 fourth quarter of fiscal 2021. Purchase accounting was finalized during fiscal 2022 with an adjustment of $4.4 million to deferred tax amounts and
goodwill.
Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated
to developed technology, in-process research and development, and customer relationships was based on management's forecasted cash inflows and
outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The amount recorded for developed technology
is being amortized with the expense reflected in cost of goods sold in the 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 Consolidated Statement of Earnings and Comprehensive Income. The amortization period for customer
relationships is estimated to be 16 years. The amount recorded for trade names and the non-competition agreement is being amortized with the expense
reflected in selling, general and administrative expenses in the Consolidated Statement of Earnings and Comprehensive Income. The amortization
period for trade names and the non-competition agreement is estimated to be 5 years and 3 years, respectively. 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 calculation of acquired net operating losses.
64 The aggregate purchase price of the acquisitions was allocated to the assets acquired and liabilities assumed based on their fair values as of the
acquisition date. The following table summarizes the fair values of the assets acquired and liabilities assumed for the fiscal year 2021 acquisitions (in
thousands):
Current assets, net of cash
Equipment and other long-term assets
Intangible assets:
Developed technology
In-process research and development
Customer relationships
Trade names
Non-competition agreement
Goodwill
Total assets acquired
Liabilities
Deferred income taxes, net
Net assets acquired
Cash paid, net of cash acquired
Contingent consideration payable
Net assets acquired
Note 5. Fair Value Measurements:
Asuragen
Eminence
$
$
$
10,422
3,762
107,000
22,700
11,700
2,000
1,000
90,563
249,147
4,963
10,297
233,887
215,587
18,300
233,887
$
$
$
3,145
1,639
6,778
—
2,133
—
—
7,848
21,543
1,436
1,357
18,750
9,765
8,985
18,750
The Company’s financial instruments include cash and cash equivalents, available for sale investments, accounts receivable, accounts payable,
contingent consideration obligations, derivative instruments, 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.
65
The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):
Assets
Exchange traded securities(1)
Derivative instruments - cash flow hedges(3)
Total assets
Liabilities
Contingent consideration
Total liabilities
Assets
Exchange traded securities(1)
Certificates of deposit(2)
Derivative instruments - cash flow hedges(3)
Total assets
Liabilities
Contingent consideration
Derivative instruments - cash flow hedges(3)
Total liabilities
Total
carrying
value as of
June 30,
2023
$
$
$
$
$
$
$
$
23,739
16,857
40,596
3,500
3,500
Total
carrying
value as of
June 30,
2022
59,962
14,500
11,026
85,488
5,000
476
5,476
$
$
$
$
$
$
$
$
Fair Value Measurements Using
Inputs Considered as
Level 2
Level 3
Level 1
23,739
$
—
$
23,739
— $
16,857
16,857
$
—
—
—
— $
— $
— $
— $
3,500
3,500
Fair Value Measurements Using
Inputs Considered as
Level 2
Level 1
Level 3
59,962
14,500
$
— $
—
—
$
74,462
11,026
11,026
$
—
—
—
—
— $
—
— $
— $
476
476
$
5,000
—
5,000
(1) Included in available-for-sale investments on the balance sheet. The cost basis of these exchange traded investment grade bond funds as of
both June 30, 2023 and June 30, 2022 was $25.0 million. The fair value of these exchange traded investment grade bond funds as of June 30,
2023, and June 30, 2022, was $23.7 million and $23.9 million, respectively. During the quarter ended September 30, 2022, the Company sold
all of its outstanding shares of ChemoCentryx Inc (CCXI). The cost basis and fair value of the Company’s available-for-sale equity investment
in CCXI was $6.6 million and $36.0 million at June 30, 2022, respectively.
(2) Included in available-for-sale investments on the balance sheet. The certificates of deposit have contractual maturity dates within one year.
(3) Derivative assets are included in other assets on the balance sheet as of June 30, 2023 and June 30, 2022. Derivative liabilities as of June 30,
2022 are included in other current liabilities on the balance sheet.
Fair value measurements of available for sale securities
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.
66
Fair value measurements of derivative instruments
In October 2018, the Company entered into forward starting swaps designated as cash flow hedges on outstanding debt. The agreement matured in
October 2022 and there was no fair value recorded on the Consolidated Balance Sheet as of June 30, 2023. The fair value of the designated derivative
instrument was $0.5 million, and was recorded within short-term liabilities on the Consolidated Balance Sheet as of June 30, 2022.
In May 2021, the Company entered into a forward starting swap designated as a cash flow hedge on forecasted debt. The forward starting swap reduces
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 swap, the Company exchanges, at specified intervals, the difference
between floating and fixed interest amounts based on $200 million of notional principal amount. The effective date of the swap was November 2022
with the full swap maturing in November 2025. The fair value of the derivative instrument was $15.4 million and $11.0 million as of June 30,
2023 and June 30, 2022, respectively, which is recorded within other assets on the Consolidated Balance Sheet.
In March 2023, the Company entered into a new forward starting swap designated as a cash flow hedge on forecasted debt. The forward starting swap
reduces 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 swap, the Company exchanges, at specified intervals, the
difference between floating and fixed interest amounts based on $100 million of notional principal amount. The effective date of the swap was April
2023 with the full swap maturing in April 2025. The fair value of the derivative instrument was $1.5 million as of June 30, 2023, and is recorded within
other assets on the Consolidated Balance Sheet.
Changes in the fair value of the designated hedged instrument are reported as a component of other comprehensive income and reclassified into interest
expense over the corresponding term of the cash flow hedge. The Company reclassified $4.5 million to interest income and related tax expense
of $1.1 million during the year ended June 30, 2023. The Company reclassified $6.4 million to interest expense and related tax benefits of $1.5 million
during the fiscal year ended June 30, 2022.
The Company reclassified $8.6 million to interest expense, $0.5 million to non-operating income for the portion of de-designated variable payments
considered probable to not occur, and related tax benefits of $2.1 million during the fiscal year ended June 30, 2021, relating to the cash flow hedge
entered into in October 2018. No amounts were reclassified relating to the cash flow hedge entered into in May 2021 as they are only recorded within
the effective period of the cash flow hedge.
The instruments were valued using observable market inputs in active markets and therefore are classified as Level 2 liabilities.
Fair value measurements of contingent consideration
The Company has $3.5 million in contingent consideration recorded as of June 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 June 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, 2022 and December 31, 2023. The opening
balance sheet fair value of the liabilities for the Asuragen acquisition 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 factors. The Company reversed an accrual for the fair value of the contingent liabilities associated with the December 31, 2022
threshold during the second quarter of fiscal 2023. The contingent consideration related to the December 31, 2023 Asuragen threshold was $2.0 million
as of June 30, 2023. Contingent consideration was $5.0 million as of June 30, 2022.
67 The Namocell contingent agreement is based on achieving certain revenue thresholds by December 31, 2022 and 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
Company reversed an accrual for the fair value of the contingent liabilities associated with the December 31, 2022 threshold during the second quarter
of fiscal 2023. As of June 30, 2023, the remaining contingent consideration related to Namocell was $1.5 million.
As of June 30, 2023, the Company's obligation for potential contingent consideration payments related to the B-Mogen acquisitions was relieved as
there is a remote likelihood that the revenue thresholds and product milestones would be achieved in the timeframe established within the purchase
agreement. As a result, the Company reversed an accrual for the fair value of the contingent liabilities at the date of settlement during fiscal 2022.
During the first quarter of fiscal 2022, the Company made a $4.0 million payment on the QT Holdings Corporation contingent consideration agreement
relating to certain product development milestones. The cash paid was consistent with the related accrual for QT Holdings Corporation as of June 30,
2021.
The ultimate settlement of contingent consideration liabilities for the Asuragen and Namocell acquisitions 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):
Fair value at the beginning of period
Purchase price contingent consideration (Note 4)
Change in fair value of contingent consideration
Payments
Fair value at the end of period
June 30,
2023
2022
$
$
$
5,000
10,600
(12,100)
—
$
3,500
29,400
—
(20,400)
(4,000)
5,000
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 an amended and restated Credit Agreement (the Amended Credit Agreement). This replaced the
revolving line-of-credit and term loan (the prior Credit Agreement), which provided for a revolving credit facility of $600.0 million and could be
increased by an additional $200.0 million subject to certain
68
conditions, and a term loan of $250.0 million. The prior Credit Agreement was bearing interest at a variable rate and would have matured on August 1,
2023.
The Amended 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 Amended Credit Agreement may be used for working capital and expenditures of the Company and its
subsidiaries, including financing permitted acquisitions. At the closing on August 31, 2022, the Company borrowed approximately $350 million
pursuant to the Amended Credit Agreement for working capital and for payment of outstanding debt under the Company’s prior credit agreement that
was entered into on August 1, 2018. Borrowings under the Amended 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 amended and restated Credit Agreement matures on August 1, 2027 and contains customary restrictive and financial covenants and customary
events of default. As of June 30, 2023, the outstanding balance under the Credit Agreement was $350.0 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 determines
whether a contract is a lease or contains a lease at inception date. Upon commencement date, operating lease right-of-use assets and liabilities are
recognized based on the present value of lease payments over the lease term. The discount rate used to calculate present value is the Company’s
incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based
primarily on its lease term and the economic environment of the applicable country or region. The Company recognizes operating lease expense on a
straight-line basis over the lease term. Further, as part of our adoption of ASC 842, the Company also made the accounting policy elections to not
capitalize short term leases (defined as a lease with a lease term that is less than 12 months) and to combine lease and non-lease components for all asset
classes in determining the lease payments.
Variable lease payments primarily include payments for non-lease components, such as maintenance costs and payments for non-components such as
sales tax. During fiscal year 2023, the Company recognized $4.4 million in variable lease expense in the Consolidated Statements of Earnings and
Comprehensive Income. During fiscal year 2023, the Company also recognized $15.9 million relating to fixed lease expense in the Consolidated
Statements of Earnings and Comprehensive Income.
The following table summarizes the balance sheet classification of the Company’s operating leases, amounts of right of use assets and lease
liabilities, the weighted average remaining lease term, and the weighted average discount rate for the Company’s operating leases (asset and liability
amounts are in thousands):
Operating leases:
Operating lease right of use assets
Current operating lease liabilities
Noncurrent operating lease liabilities
Total operating lease liabilities
Weighted average remaining lease term (in years):
Weighted average discount rate (%):
Balance Sheet Classification
Right of Use Asset
Operating lease liabilities - current
Operating lease liabilities
As of
June 30,
2023
$
$
$
98,326
11,199
93,766
104,965
9.33
4.27
69
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 year ended June 30, 2023 (in thousands):
Cash amounts paid on operating lease liabilities(1)
Right of use assets obtained in exchange for lease liabilities
Year ended
June 30,
2023
$
$
14,934
48,103
(1) Total cash paid for the Company’s operating leases during the year ended June 30, 2023 include cash amounts paid on operating lease liabilities and
variable lease expenses. Cash flow impacts from right of use assets and lease liabilities are presented net on the cash flow statement in changes in
other operating activity.
The following table summarizes payments by date for the Company’s operating leases, which is then reconciled to our total lease obligation (in
thousands):
2024
2025
2026
2027
2028
Thereafter
Total
Less: Amounts representing interest
Total lease obligations
June 30, 2023
Operating
Leases
15,167
14,957
15,097
12,484
12,482
59,715
129,902
24,937
104,965
$
$
$
Certain leases include one or more options to renew, with terms that extend the lease term up to five years. The Company includes 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, the Company is not reasonably certain to exercise such
options.
Note 8. Supplemental Equity and Accumulated Other Comprehensive Income (loss) Information:
Equity
The Company has declared cash dividends per share of $0.32 in each of the full fiscal years ended June 30, 2023, June 30, 2022, and June 30, 2021.
During the years ended June 30, 2023, June 30, 2022 and June 30, 2021, the Company repurchased 222,000 shares at an average share price of $88.12,
1,576,952 shares at an average share price of $102.06, and 480,000 shares at an average share price of $89.95, respectively. The Company’s accounting
policy is to record the portion of share repurchases in excess of the par value entirely in retained earnings. During fiscal year 2023, 2022 and 2021, the
amounts within the Consolidated Statements of Shareholders’ Equity for the surrender and retirement of stock to exercise options due to net settlement
stock options exercises were $28.9 million, $23.5 million, and $19.3 million, respectively.
70
Accumulated Other Comprehensive Income (loss)
Changes in accumulated other comprehensive income (loss) attributable to Bio-Techne, net of tax, are summarized as follows (in thousands):
Unrealized
Gains
(Losses) on
Derivative
Instruments
Foreign
Currency
Translation
Adjustments
Balance June 30, 2020(3)
Other comprehensive income (loss) before reclassifications
Reclassification from loss on derivatives to interest expense, net of taxes(1)
Balance June 30, 2021(3)
Other comprehensive income (loss) before reclassifications, net of taxes, attributable to Bio-
Techne(2)
Reclassification from loss on derivatives to interest expense, net of taxes, attributable to Bio-
Techne(1)
Balance as of June 30, 2022
Other comprehensive income (loss) before reclassifications, net of taxes, attributable to Bio-
Techne(2)
Reclassification from (gain) loss on derivatives to interest expense, net of taxes, attributable to
Bio-Techne(1)
Reclassification of cumulative translation adjustment for Eminence to non-operating income,
net of taxes, attributable to Bio-Techne
Balance as of June 30, 2023(2)
$
$
$
$
(13,253)
100
6,960
(6,193)
9,403
4,859
8,069
8,246
(3,453)
—
12,862
$
$
$
$
(83,946)
32,848
—
(51,098)
$
$
Total
(97,199)
32,948
6,960
(57,291)
(32,171)
(22,768)
—
$
(83,269)
4,191
—
152
(78,926)
$
4,859
(75,200)
12,437
(3,453)
152
(66,064)
(1) Gains (losses) on the interest swap will be reclassified into interest expense as payments on the derivative agreement are made. The Company
reclassified $4,526 to interest income and recorded a related tax expense of $1,073 during fiscal 2023. The Company reclassified $6,352 to interest
expense and recorded a related tax benefit of $1,493 during fiscal 2022. The Company reclassified $8,598 to interest expense and $512 to non-
operating income relating to variable interest payments that were probable not to occur for the fiscal year ended June 30, 2021. The Company also
recorded a related tax benefit of $2,150 during fiscal 2021.
(2) Other comprehensive income related to foreign currency translation adjustments in the table above includes the amount attributable to Bio-Techne
and excludes the $33 and $70 attributable to the non-controlling interest in Eminence as of June 30, 2023, and June 30, 2022, respectively.
(3) The Company had a net deferred tax liability of $3,995 and $2,480 as of June 30, 2023, and June 30, 2022, respectively, and a net deferred tax
benefit of $1,908 as of June 30, 2021.
71
Note 9. Earnings Per Share:
The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share amounts):
Earnings per share – basic:
Net earnings, including noncontrolling interest
Less net earnings (loss) attributable to noncontrolling interest
Net earnings attributable to Bio-Techne
Income allocated to participating securities
Income available to common shareholders
Weighted-average shares outstanding – basic
Earnings per share – basic
Earnings per share – diluted:
Net earnings, including noncontrolling interest
Less net earnings (loss) attributable to noncontrolling interest
Net earnings attributable to Bio-Techne
Income allocated to participating securities
Income available to common shareholders
Weighted-average shares outstanding – basic
Dilutive effect of stock options and restricted stock units
Weighted-average common shares outstanding – diluted
Earnings per share – diluted
2023
Year Ended June 30,
2022
2021
285,442
179
285,263
(70)
285,193
157,179
1.81
285,442
179
285,263
(70)
285,193
157,179
4,676
161,855
1.76
$
$
$
$
$
$
263,099
(8,952)
272,051
(121)
271,930
156,874
1.73
263,099
(8,952)
272,051
(121)
271,930
156,874
7,240
164,114
1.66
$
$
$
$
$
$
139,585
(825)
140,410
(86)
140,324
154,986
0.91
139,585
(825)
140,410
(86)
140,324
154,986
6,946
161,932
0.87
$
$
$
$
$
$
Basic net income per common share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net
income per common share is computed by dividing net income by the weighted average number of common and potentially dilutive common shares
outstanding during the period. Potentially dilutive common shares of our stock result from dilutive common stock options and restricted stock units. We
use the treasury stock method to calculate the weighted-average shares used in the diluted earnings per share computation. Under the treasury stock
method, the proceeds from exercise of an option, the amount of compensation cost, if any, for future service that we have not yet recognized, and the
amount of estimated tax benefits that would be recorded in paid-in capital, if any, when the option is exercised are assumed to be used to repurchase
shares in the current period.
The dilutive effect of stock options in the above table excludes all options for which the aggregate exercise proceeds exceeded the average market price
for the period. The number of potentially dilutive option shares excluded from the calculation was 4.5 million, 2.8 million, and 2.4 million for the
fiscal years ended June 30, 2023, 2022 and 2021, respectively.
72
Note 10. Share-based Compensation and Other Benefit Plans:
The cost of employee services received in exchange for the award of equity instruments is based on the fair value of the award at the date of grant.
Compensation cost is recognized using a straight-line method over the vesting period and is net of estimated forfeitures. Stock option exercises and
stock awards are satisfied through the issuance of new shares.
Equity incentive plan: The 2020 Equity Incentive Plan, which replaced the Company’s Second Amended and Restated 2010 Equity Incentive Plan,
provides for the granting of incentive and nonqualified stock options, restricted stock, restricted stock units, performance shares, performance units and
stock appreciation rights. There were 36.2 million shares of common stock authorized for grant under the Plan. The maximum aggregate number of
shares of common stock reserved and available for awards under the Plan is 9,936,808 shares. At June 30, 2023, there were 6.6 million shares of
common stock available for grant under the 2020 Equity Incentive Plan. The maximum term of incentive options granted under the 2020 Equity
Incentive Plan is ten years. The 2020 Equity Incentive Plan replaced the Company’s second A&R 2010 Plan, which had previously amended and
restated the Company’s Amended and Restated 2010 Equity Incentive Plan (the A&R 2010 Plan). The 2020 Equity Incentive Plan and Second A&R
2010 Plan (collectively, the Plans) are administered by the Board of Directors and its Executive Compensation Committee, which determine the persons
who are to receive awards under the Plans, the number of shares subject to each award and the term and exercise price of each award. The number of
shares of common stock subject to outstanding awards as of June 30, 2023 under the 2020 Equity Incentive Plan were 13.9 million.
The fair values of options granted under the Plans were estimated on the date of grant using the Black-Scholes option-pricing model with the following
assumptions used:
Dividend yield
Expected volatility
Risk-free interest rates
Expected lives (years)
2023
0.34
Year Ended June 30,
2022
0.27
2021
0.47
%
%
%
25%-30 %
30%-36 % 27%-33 %
2.8%-4.4 % 0.6%-2.6 % 0.2%-0.7 %
4.7
4.3
4.4
The dividend yield is based on the Company’s historical annual cash dividend divided by the market value of the Company’s common stock. The
expected annualized volatility is based on the Company’s historical stock price over a period equivalent to the expected life of the option granted. The
risk-free interest rate is based on U.S. Treasury constant maturity interest rates with a term consistent with the expected life of the options granted.
73
Stock option activity under the Plans for the three years ended June 30, 2023, consists of the following (shares in thousands):
Outstanding at June 30, 2020
Granted
Forfeited
Exercised
Outstanding at June 30, 2021
Granted
Forfeited
Exercised
Outstanding at June 30, 2022
Granted
Forfeited and Expired
Exercised
Outstanding at June 30, 2023
Exercisable at June 30, 2021:
Exercisable at June 30, 2022:
Exercisable at June 30, 2023:
Number of
Shares (in
thousands)
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
(millions)
Weighted
Average
Contractual
Life (years)
$
$
$
$
14,435
3,051
(109)
(2,509)
14,868
1,390
(539)
(2,450)
13,269
2,351
(118)
(1,578)
13,924
7,057
7,797
8,641
35.07
69.44
53.58
28.13
43.16
120.15
87.05
33.61
51.20
93.81
85.99
29.48
60.56
31.61
36.99
44.76
$
843.3
386.7
3.4
2.4
The weighted average fair value of options granted during fiscal 2023, 2022, and 2021 was $29.53, $29.78, and $14.94, respectively. The total intrinsic
value of options exercised during fiscal 2023, 2022, and 2021 were $90.2 million, $209.3 million, and $145.6 million, respectively. The total fair value
of options vested during fiscal 2023, 2022, and 2021 were $46.5 million, $82.3 million, and $70.5 million, respectively.
Restricted common stock activity under the Plans for the three years ended June 30, 2023, consists of the following (units in thousands):
Unvested at June 30, 2020
Granted
Vested
Forfeited
Unvested at June 30, 2021
Granted
Vested
Forfeited
Unvested at June 30, 2022
Granted
Vested
Forfeited
Unvested at June 30, 2023
Weighted
Average
Remaining
Contractual
Term
(years)
Weighted
Average Grant
Date Fair
Value
Number of
Shares (in
thousands)
$
110
47
(65)
—
92
$
28
(54)
—
66
$
11
(40)
—
$
37
44.30
66.18
42.91
—
56.52
122.34
54.57
—
85.83
73.94
78.85
—
89.91
5.90
The total fair value of restricted shares that vested was $3.1 million for fiscal 2023, $2.9 million for fiscal 2022, and $2.8 million for fiscal 2021.
74
Restricted stock unit activity under the Plans for the three years ended June 30, 2023, consists of the following (units in thousands):
Outstanding at June 30, 2020
Granted
Vested
Forfeited
Outstanding at June 30, 2021
Granted
Vested
Forfeited
Outstanding at June 30, 2022
Granted
Vested
Forfeited
Outstanding at June 30, 2023
Number of
Units
(in thousands)
Weighted
Average Grant
Date Fair
Value
Weighted
Average
Remaining
Contractual
Term
(years)
465 $
123
(206)
—
382 $
110
(145)
(45)
302 $
107
(123)
(3)
283 $
39.81
75.20
32.55
—
55.13
117.60
44.62
104.34
75.54
90.96
52.34
106.13
91.10
5.32
The total fair value of restricted stock units that vested was $6.4 million for fiscal 2023, $6.5 million for fiscal 2022, and $6.7 million for fiscal
2021. The restricted stock units vest over a three-year period.
Stock-based compensation cost, inclusive of payroll taxes, of $39.3 million, $44.0 million, and $46.4 million was included in selling, general and
administrative expense in fiscal 2023, 2022 and 2021, respectively. Additionally, stock-based compensation costs, inclusive of payroll taxes, of $1.0
million, $1.4 million, and $1.6 million was included in cost of goods sold in 2023, 2022, and 2021, respectively. As of June 30, 2023, there was
$27.4 million of unrecognized compensation cost related to non-vested stock options, non-vested restricted stock units and non-vested restricted stock
which will be expensed in fiscal 2024 through 2026 using a 4.5% forfeiture rate. The weighted average period over which the compensation cost is
expected to be recognized is 2.2 years.
Employee stock purchase plan: In fiscal year 2015, the Company established the Bio-Techne Corporation 2014 Employee Stock Purchase Plan (ESPP),
which was approved by the Company’s shareholders on October 30, 2014, and which is designed to comply with IRS provisions governing employee
stock purchase plans. 800,000 shares were allocated to the ESPP. The Company recorded expense of $0.9 million, $1.0 million, and $0.9 million for the
ESPP in fiscal 2023, 2022, and 2021, respectively.
Profit sharing and savings plans: The Company has profit sharing and savings plans for its U.S. employees, which conform to IRS provisions for
401(k) plans. The Company makes matching contributions to the Plan. The Company has recorded an expense for contributions to the plans of
$4.9 million, $4.3 million, and $3.4 million for the years ended June 30, 2023, 2022, and 2021, respectively. The Company operates defined
contribution pension plans, which consists of primarily our U.K. and China employees. The Company’s contribution to the defined pension contribution
plan was $2.4 million, $2.3 million, and $1.6 million for the years ended June 30, 2023, 2022 and 2021, respectively.
Performance incentive programs: In fiscal 2023, under certain employment agreements, a Management Incentive Plan, and a business incentive plan,
available to executive officers, certain management personnel, and certain other professional employees, the Company recorded cash bonuses of $10.8
million, granted options for 2,350,980 shares of common stock, issued 10,816 restricted common shares and 107,202 restricted stock units. In fiscal
2022 and fiscal 2021, the Company recorded cash bonuses of $26.5 million and $21.1 million, granted options for 1,390,436 and 3,051,044 shares of
common stock, issued 27,584 and 47,212 restricted common stock shares and 110,292 and 123,292 restricted stock units, respectively.
75
Note 11. Other Income / (Expense)
The components of other income (expense) in the accompanying Statement of Earnings and Comprehensive Income are as follows (in thousands):
Interest expense
Interest income
Gain (loss) on investment(1)
Gain (loss) on equity method investment
Other non-operating income (expense), net(1)
Total other income (expense)
$
2023
(11,215)
3,410
49,328
(1,143)
(665)
39,715
$
$
Year Ended
June 30,
2022
(11,309)
794
15,186
—
125
4,796
$
$
2021
(13,952)
473
(68,047)
—
(7,595)
(89,121)
(1)For the year ended June 30, 2023, primarily due to a $37.2 million gain on the sale of our CCXI investment, a $11.7 million gain on the sale of
Eminence, and a gain of $0.4 million related to the change in fair value of our exchange traded bond funds, compared to a $16.1 million gain in the fair
value of our CCXI investment for the year ended June 30, 2022 and a loss of $67.9 million in the fair value of our CCXI investment in the year ended
June 30, 2021.
Note 12. Income Taxes:
Income before income taxes was comprised of the following (in thousands):
Domestic
Foreign
Earnings before income taxes
The provision for income taxes consisted of the following (in thousands):
2023
288,458
50,201
338,659
$
$
$
Year Ended June 30,
2022
255,118
46,268
301,386
$
2021
95,662
52,513
148,175
$
$
Taxes on income consist of:
Current tax provision:
Federal
State
Foreign
Total current tax provision
Deferred tax provision:
Federal
State
Foreign
Total deferred tax provision
Total income tax provision
2023
Year Ended June 30,
2022
2021
$
$
59,810 $
12,753
10,453
83,016
(28,829)
(2,414)
1,444
(29,799)
53,217 $
10,080 $
6,663
14,481
31,224
8,130
1,477
(2,544)
7,063
38,287 $
15,179
6,681
14,743
36,603
(20,812)
(4,962)
(2,239)
(28,013)
8,590
The Company’s effective income tax rate for fiscal 2023 was 15.7% vs 12.7% in the prior year. The change in the effective tax rate for fiscal 2023 and
2022 was driven by share-based compensation as the number of stock option exercises decreased compared to the prior year comparative period.
76
The Company’s effective income tax rate for fiscal 2022 was 12.7% vs 5.8% in the prior year. The change in the effective tax rate for fiscal 2022 and
2021 was driven by a mix of increased net income and the dilutive effect that the increased net income has on the favorable rate benefits, primarily
related to share-based compensation excess tax benefits of $29.3 million in fiscal 2022.
The Company’s discrete tax benefits in fiscal 2023, 2022, and 2021 primarily related to share-based compensation excess tax benefits of $12.3 million,
$29.3 million, and $28.1 million, respectively.
The following is a reconciliation of the federal tax calculated at the statutory rate to the actual income taxes provided:
Income tax expense at federal statutory rate
State income taxes, net of federal benefit
Research and development tax credit
Contingent consideration adjustment
Foreign tax rate differences
(Gain)/loss on investment
Option exercises
U.S. taxation of foreign earnings
Foreign derived intangible income
Foreign withholding tax
Executive compensation limitations
Other, net
Effective tax rate
Year Ended June 30,
2023
2022
2021
21.0 %
2.5
(1.3)
(0.8)
(0.6)
(0.7)
(3.3)
0.4
(3.4)
1.5
0.8
(0.4)
15.7 %
21.0 %
2.2
(1.0)
(1.4)
0.4
1.1
(9.4)
(0.1)
(1.9)
—
1.9
(0.10)
12.7 %
21.0 %
0.6
(1.8)
0.8
0.8
—
(16.9)
(0.1)
(5.1)
—
6.5
0.0
5.8 %
Deferred taxes on the Consolidated Balance Sheets consisted of the following temporary differences (in thousands):
Inventory
Net operating loss carryovers
Tax credit carryovers
Excess tax basis in equity investments
Deferred compensation
Lease liability
Capitalized R&D
Other
Valuation allowance
Deferred tax assets
Net unrealized gain on available-for-sale investments
Intangible asset amortization
Depreciation
Right of use asset
Derivative - cash flow hedge
Other
Deferred tax liabilities
Net deferred income tax liabilities
June 30,
2023
2022
$
$
$
10,906
20,315
9,218
939
16,528
21,001
21,081
4,379
(9,344)
95,023
—
(134,810)
(21,449)
(20,021)
(3,995)
(3,730)
(184,005)
(88,982)
$
8,033
27,948
13,131
2,435
11,778
13,779
—
8,585
(9,466)
76,223
(6,963)
(133,672)
(18,060)
(12,793)
(2,480)
(1,249)
(175,217)
(98,994)
77
A deferred tax valuation allowance is required when it is more likely than not that all or a portion of deferred tax assets will not be realized. The
valuation allowance as of June 30, 2023 was $9.3 million compared to $9.5 million in the prior year.
As of June 30, 2023, the $9.3 million valuation allowance relates to certain foreign and state tax net operating loss and state credit carryforwards that
existed at the date the Company completed various previous acquisitions as well as immaterial amounts generated after the acquisitions. The Company
believes it is more likely than not that these tax carryovers will not be realized.
As of June 30, 2023, the Company has federal operating loss carryforwards of approximately $52.7 million and state operating loss carryforwards of
$142.7 million from its previous acquisitions, which are not limited under IRC Section 382. As of June 30, 2023, the Company has foreign net operating
loss carryforwards of $3.2 million. Some of the net operating loss carryforwards expire between fiscal 2024 and 2036. Federal net operating loss
carryforwards generated after December 31, 2017 have an indefinite carryforward period but the Company expects to be fully utilize these attributes by
June 30, 2027. The Company has a deferred tax asset of $14.8 million, net of the valuation allowance discussed above, related to the net operating loss
carryovers. As of June 30, 2023, the Company has federal and state tax credit carryforwards of $4.9 million and $5.4 million, respectively. The federal
tax credit carryforwards expire between 2028 and 2040. The majority of the state credit carryforwards have no expiry date. The state credit
carryforwards that have expiry dates have a full valuation allowance. The Company has a deferred tax asset of $6.1 million, net of the valuation
allowance discussed above, related to the tax credit carryovers.
As of June 30, 2023, the Company has approximately $219 million of undistributed earnings in its foreign subsidiaries. Approximately $99 million of
these earnings are no longer considered permanently reinvested and the Company expects to be able to repatriate earnings on a tax neutral basis. The
Company has not provided deferred taxes on approximately $120 million of undistributed earnings from non-U.S. subsidiaries as of June 30, 2023
which are indefinitely reinvested in operations. Because of the multiple entities as well as the complexities of laws and regulations by which to
repatriate the earnings to minimize tax cost, it is not practical to determine the income tax liability that would be payable if such earnings were not
reinvested indefinitely. A deferred tax liability will be recognized if the Company can no longer demonstrate that it plans to indefinitely reinvest the
undistributed earnings.
We continue to analyze our global working capital requirements and the potential tax liabilities that would be incurred if the non-U.S. subsidiaries
distribute cash to the U.S. parent, which include local country withholding tax and potential U.S. state taxation.
The following is a reconciliation of the beginning and ending balance of unrecognized tax benefits (in thousands):
2023
Year Ended June 30,
2022
2021
Beginning balance
Additions due to acquisitions
Additions for tax positions of prior year
Decrease in unrecognized tax benefits for prior year positions
Settlements
FX impact
Ending balances
$
$
5,302
$
—
—
—
—
(11)
5,291
$
7,271
960
304
(357)
(2,860)
(16)
5,302
$
$
4,297
—
4,038
(778)
(286)
—
7,271
Included in the balance of unrecognized tax benefits at June 30, 2023 are potential benefits of $5.3 million that, if recognized, would affect the effective
tax rate on income from continuing operations. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for
income taxes. The Company had $0.5 million of accrued interest and penalties as of June 30, 2023. The amount recorded for the periods ended June
30, 2022 was $0.3 million in accrued interest and penalties and for 2021 was immaterial. The Company does not believe it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly increase in the next twelve months. The Company files income tax returns in the U.S.
federal and certain state tax jurisdictions, and several jurisdictions outside the U.S. The Company’s federal returns are subject to tax assessment for
2018 and subsequent years. State and foreign income tax returns are generally subject to examination for a period of three to five years after filing of the
respective
78
return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification
to the states.
Note 13. Segment Information:
The Company operates under two operating segments, Protein Sciences and Diagnostics and Genomics.
The Company’s Protein Sciences segment is comprised of the reagent solutions and analytical solutions. These businesses manufacture consumables
used for conducting laboratory experiments by both industry and academic scientists within the biotechnology and biomedical life science fields. No
customer in the Protein Sciences segment accounted for more than 10% of the segment’s net sales for the years ended June 30, 2023, 2022, and 2021.
The Company’s Diagnostics and Genomics segment is comprised of diagnostics reagents, genomics, and molecular diagnostics, which includes our
Exosome and Asuragen acquisitions. Diagnostics reagents develops and manufactures a range of controls and calibrators used with diagnostic
equipment and as proficiency testing tools, as well as other reagents incorporated into diagnostic kits. Genomics and molecular diagnostics consists
of exosome-based diagnostics products for various pathologies, as well as tissue-based in-situ hybridization assays for research in clinical use. No
customer in the Diagnostics and Genomics segment accounted for more than 10% of the segment’s net sales for the fiscal years ended June 30, 2023,
2022, and 2021.
There are no concentrations of business transacted with a particular customer or supplier or concentrations of revenue from a particular product or
geographic area that would severely impact the Company in the near term.
Following is financial information relating to the operating segments (in thousands):
Net sales:
Protein Sciences
Diagnostics and Genomics
Intersegment
Consolidated net sales
Operating income:
Protein Sciences
Diagnostics and Genomics
Segment operating income
Costs recognized on sale of acquired inventory
Amortization of intangibles
Impact of partially-owned consolidated subsidiaries(1)
Acquisition related expenses and other
Eminence impairment
Stock based compensation, inclusive of employer taxes
Restructuring costs
Corporate general, selling, and administrative expenses
Consolidated operating income
2023
Year Ended June 30,
2022
2021
$
$
$
$
845,747 $
292,602
(1,647)
1,136,702 $
832,311
274,843
(1,555)
1,105,599
373,684 $
43,037
416,721
(400)
(76,413)
647
9,965
—
(41,217)
(3,829)
(6,530)
298,944 $
377,623
48,977
426,600
(1,596)
(73,054)
(2,393)
19,070
(18,715)
(46,401)
(1,640)
(5,281)
296,590
$
$
$
$
704,564
227,744
(1,276)
931,032
330,225
38,425
368,650
(1,565)
(64,239)
(1,505)
(7,114)
—
(51,846)
(142)
(4,943)
237,296
(1)Adjusted operating income for fiscal 2021 have been updated for comparability to fiscal 2022 for the inclusion of the impact of partially-owned
consolidated subsidiaries on the Company’s adjusted operating income.
The Company has some integrated facilities that serve both segments. As such, asset and capital expenditure information by operating segment has not
been provided and is not available, since the Company does not produce or utilize such information internally. In addition, although depreciation and
amortization expense is a component of each operating segment’s operating results, it is not discretely identifiable.
79
The Company has disclosed sales by geographic area based on the location of the customer or distributor in Note 2. The Company has disclosed dis-
aggregated product and service revenue by consumables, instruments, and services in Note 2. The Company considers total instrument and total service
revenue to represent similar groups of products in the fiscal years presented. The Company considered our consumables sold in the Protein Sciences and
Diagnostics and Genomics segments to represent different groups of products and therefore have separately disclosed the related consumables revenue
(in thousands) :
Consumables revenue - Protein Sciences
Consumables revenue - Diagnostics and Genomics
Total consumable revenue
2023
665,301
252,432
917,733
$
$
The following is financial information relating to geographic areas (in thousands):
$
Year Ended June 30,
2022
646,952
243,922
890,874
$
2021
557,037
194,948
751,985
$
$
Long-lived assets:
United States and Canada
Europe
Asia
Total long-lived assets
Intangible assets:
United States and Canada
Europe
Asia
Total intangible assets
Year ended June 30,
2023
2022
203,657
19,263
3,280
226,200
529,652
4,553
440
534,645
$
$
$
$
203,732
16,223
3,287
223,242
523,536
6,281
1,705
531,522
$
$
$
$
Long-lived assets are comprised of land, buildings and improvements and equipment, net of accumulated depreciation.
Note 14. Subsequent Events:
On July 7, 2023, the Company completed the acquisition of Lunaphore Technologies SA for approximately $165 million, net of cash acquired.
80
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Bio-Techne Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Bio-Techne Corporation and subsidiaries (the Company) as of June 30, 2023 and
June 30, 2022, the related consolidated statements of earnings and comprehensive income, shareholders’ equity, and cash flows for each of the years in
the three-year period ended June 30, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and June 30, 2022, and the results
of its operations and its cash flows for each of the years in the three-year period ended June 30, 2023, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s
internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 23, 2023 expressed an unqualified opinion on
the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit
matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair value measurement of the developed technology intangible asset acquired in the Namocell acquisition
As discussed in Note 4 to the consolidated financial statements, the Company acquired Namocell, Inc. in July 2022, for total consideration of
$101.2 million, net of cash acquired. As a result of the acquisition, the Company recognized intangible assets of $75.6 million, including
developed technology of $73.9 million.
81 We identified the assessment of the fair value measurement of the acquired developed technology as a critical audit matter. There was a high
degree of subjectivity in applying and evaluating certain key assumptions used to estimate the fair value of the acquired developed technology.
Specifically, the revenue growth rates and the discount rate were challenging to test as they represented subjective determinations of future
market and economic conditions. Changes to those assumptions could have had a significant effect on the determination of the fair value
measurements.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the
development of the revenue growth rates and discount rate. We performed sensitivity analyses over the revenue growth rates to assess the
impact of changes in those assumptions on the Company’s determination of the fair value of the developed technology. We evaluated the
reasonableness of the Company’s forecasted revenue growth rates used to determine forecasted revenues by comparing them to historical
results and industry related third-party data. In addition, we involved valuation professionals with specialized skills and knowledge, who
assisted in:
● evaluating the discount rate used by the Company by comparing it against a discount rate range that was independently developed using
publicly available market data for comparable entities.
● testing the estimate of the fair value of the developed technology using the Company’s cash flow forecasts and discount rates and
comparing the results to the Company’s fair value estimates.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
Minneapolis, Minnesota
August 23, 2023
82 Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Bio-Techne Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Bio-Techne Corporation and subsidiaries' (the Company) internal control over financial reporting as of June 30, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of June 30, 2023 and June 30, 2022, the related consolidated statements of earnings and comprehensive income,
shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2023, and the related notes (collectively, the
consolidated financial statements), and our report dated August 23, 2023 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
83 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Minneapolis, Minnesota
August 23, 2023
84 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
(a) Evaluation of Disclosure Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), management, with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this report, the effectiveness of our disclosure
controls and procedures as defined in Exchange Act Rule 13a-15(e). The evaluation was based upon reports and certifications provided by a number
of executives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2023, our disclosure
controls and procedures were effective.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting also includes those policies and procedures that:
(i) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company;
(ii) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and
(iii) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Under the supervision of the Audit Committee of the Board of Directors and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using
the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on our assessment and those criteria, our Chief Executive Officer and Chief Financial Officer concluded that our
internal control over financial reporting was effective as of June 30, 2023.
The attestation report on our internal control over financial reporting issued by KPMG LLP appears in Item 8 of this report.
85 (c) Changes in Internal Control Over Financial Reporting
As previously announced, we acquired Namocell Inc on July 1, 2022. With the completion of final financial integration activities, the Company’s
operations have been incorporated into our assessment of internal control over financial reporting as of June 30, 2023.
There were no other changes in the Company’s internal control over financial reporting during fiscal year 2023 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
During the three months ended June 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or
"non-Rule 10b5-1 trading arrangement," as each term is defined in item 408(a) of Regulation S-K.
86 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
Other than "Executive Officers of the Registrant" which is set forth at the end of Item 1 in Part I of this report, the information required by Item 10 is
incorporated herein by reference to the sections entitled "Election of Directors," "Principle Shareholders" and "Additional Corporate Governance
Matters" in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to the sections entitled "Election of Directors" and "Executive Compensation"
in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
The information required by Item 12 is incorporated by reference to the sections entitled "Principal Shareholders" and "Management Shareholdings" in
the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference to the sections entitled "Election of Directors" and "Additional Corporate Governance
Matters" in the Company’s Proxy Statement for its 2023 Annual Meeting of Shareholders which will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the close of the fiscal year for which this report is filed.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by Item 14 is incorporated herein by reference to the section entitled "Audit Matters" in the Company’s Proxy Statement for its
2023
Annual Meeting of Shareholders which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after
the close of the fiscal year for which this report is filed.
87 PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
A. (1) List of Financial Statements.
The following Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K:
Consolidated Statements of Earnings and Comprehensive Income for the Years Ended June 30, 2023, 2022, and 2021
Consolidated Balance Sheets as of June 30, 2023 and 2022
Consolidated Statements of Shareholders’ Equity for the Years Ended June 30, 2023, 2022, and 2021
Consolidated Statements of Cash Flows for the Years Ended June 30, 2023, 2022, and 2021
Notes to Consolidated Financial Statements for the Years Ended June 30, 2023, 2022, and 2021
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 185)
A. (2) Financial Statement Schedules.
All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the Consolidated
Financial Statements or Notes thereto.
88 A. (3) Exhibits.
EXHIBIT INDEX
for Form 10-K for the 2023 Fiscal Year
Exhibit
Number
3.1
3.2
4.1
10.1**
10.2**
10.3**
10.4**
10.5**
10.6**
10.7**
10.8**
10.9**
10.10**
10.11**
10.12**
Description
Amended and Restated Articles of Incorporation of the Company—incorporated by reference to Exhibit 3.1 of the Company’s 8-K
dated November 1, 2022*
Fourth Amended and Restated Bylaws of the Company--incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K dated
April 27, 2022*
Description of Capital Stock -- attached as Exhibit 4.1 hereto
Management Incentive Plan--incorporated by reference to Exhibit 10.13 of the Company’s Form 10-K for the year ended June 30,
2013*
Second Amended and Restated 2010 Equity Incentive Plan--incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K
dated October 26, 2017*
Form of Time Vesting Restricted Stock Award Agreement - incorporated by reference to Exhibit 10.3 of the Company's Form 10-K
dated August 25, 2021*
Form of Performance Vesting Restricted Stock Award Agreement - incorporated by reference to Exhibit 10.4 of the Company's Form
10-K dated August 25, 2021*
Form of Time Vesting Restricted Stock Unit Award Agreement - incorporated by reference to Exhibit 10.5 of the Company's Form
10-K dated August 25, 2021*
Form of Performance Vesting Restricted Stock Unit Award Agreement - incorporated by reference to Exhibit 10.6 of the Company's
Form 10-K dated August 25, 2021*
Form of the Time Vesting Performance Unit Award Agreement - incorporated by reference to Exhibit 10.7 of the Company's Form
10-K dated August 25, 2021*
Form of Performance Vesting Performance Unit Award Agreement - incorporated by reference to Exhibit 10.8 of the Company's
Form 10-K dated August 25, 2021*
Form of Time Vesting Incentive Stock Option Agreement - incorporated by reference to Exhibit 10.9 of the Company's Form 10-K
dated August 25, 2021*
Form of Performance Vesting Incentive Stock Option Agreement - incorporated by reference to Exhibit 10.10 of the Company's Form
10-K dated August 25, 2021*
Form of Employee Non-Qualified Stock Option Agreement - incorporated by reference to Exhibit 10.11 of the Company's Form 10-K
dated August 25, 2021*
Form of Director Non-Qualified Stock Option Agreement for Second Amended and Restated 2010 Equity Incentive Plan--
incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated October 26, 2017*
89
10.13**
10.14**
10.15**
10.16
10.17**
10.18**
10.20
10.21**
10.22**
10.23**
10.24**
10.25**
10.26**
10.27**
10.28**
10.29**
19
21
Employment Agreement by and between the Company and Charles Kummeth--incorporated by reference to Exhibit 10.11 of the
Company’s Form 10-K dated September 7, 2017*
Form of Employment Agreement by and between the Company and Executive Officers of the Company other than the CEO--
incorporated by reference to Exhibit 10.12 of the Company’s Form 10-K dated September 7, 2017*
Form of Amendment No. 1 to Executive Employment Agreement – incorporated by reference to Exhibit 10.15 of the Company’s
Form 10-Q dated May 11, 2020*
Amended and Restated Credit Agreement by and among the Company, the Guarantors party thereto, the Lenders party thereto, and
BMO Harris Bank N.A., as Administrative Agent, dated August 31, 2022 -incorporated by reference to Exhibit 10.1 of the
Company’s Form 8-K dated September 7, 2022*
Form of Indemnification Agreement entered into with each director and executive officer of the Company--incorporated by reference
to Exhibit 10.1 of the Company’s Form 10-Q dated February 8, 2018*
Bio-Techne 2020 Equity Incentive Plan – incorporated by reference to Exhibit 10.1 of the Company’s Form 8-k dated November 3,
2020*
Form of Director Non-Qualified Stock Option Agreement – incorporated by reference to Exhibit 10.2 of the Company’s Form 8-k
dated November 3, 2020*
Form of Employee Non-Qualified Stock Option Agreement (Global) – incorporated by reference to Exhibit 10.3 of the Company’s
Form 8-k dated November 3, 2020*
Form of Performance Vesting Cash Unit Agreement– incorporated by reference to Exhibit 10.4 of the Company’s Form 8-k dated
November 3, 2020*
Form of Performance Vesting Incentive Stock Option Agreement– incorporated by reference to Exhibit 10.5 of the Company’s Form
8-k dated November 3, 2020*
Form of Performance Vesting Restricted Stock Agreement– incorporated by reference to Exhibit 10.6 of the Company’s Form 8-k
dated November 3, 2020*
Form of Performance Vesting Restricted Stock Unit Agreement– incorporated by reference to Exhibit 10.7 of the Company’s Form 8-
k dated November 3, 2020*
Form of Time Vesting Incentive Stock Option Agreement– incorporated by reference to Exhibit 10.8 of the Company’s Form 8-k
dated November 3, 2020*
Form of Time Vesting Cash Unit Agreement– incorporated by reference to Exhibit 10.9 of the Company’s Form 8-k dated November
3, 2020*
Form of Time Vesting Restricted Stock Agreement– incorporated by reference to Exhibit 10.10 of the Company’s Form 8-k dated
November 3, 2020*
Form of Time Vesting Restricted Stock Unit Agreement– incorporated by reference to Exhibit 10.11 of the Company’s Form 8-k
dated November 3, 2020*
Bio-Techne’s Insider Trading Policy
Subsidiaries of the Company
90
23
31.1
31.2
32.1
32.2
101
Consent of KPMG LLP, Independent Registered Public Accounting Firm
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The following financial statements from the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023,
formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Earnings and
Comprehensive Income, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Shareholders’ Equity, (iv) the
Consolidated Statements of Cash Flows, and (v) Notes to the Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Incorporated by reference; SEC File No. 000-17272
*
** Management contract or compensatory plan or arrangement
Exhibits for Form 10-K have not been included in this report. Exhibits have been filed with the Securities and Exchange Commission. Upon request to
the Investor Relations Department, Bio-Techne Corporation will furnish, without charge, any such exhibits as well as copies of periodic reports filed
with the Securities and Exchange Commission
None.
ITEM 16. FORM 10-K SUMMARY
91
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: August 23, 2023
BIO-TECHNE CORPORATION
/s/ Charles R. Kummeth
By: Charles R. Kummeth
Its: President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Date
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
August 23, 2023
Signature and Title
/s/ Robert V. Baumgartner
Robert V. Baumgartner
Chairman of the Board and Director
/s/ Julie Bushman
Julie Bushman, Director
/s/ Rupert Vessey
Dr. Rupert Vessey, Director
/s/ Joseph Keegan, Ph.D.
Dr. Joseph Keegan, Director
/s/ John L. Higgins
John L. Higgins, Director
/s/ Roeland Nusse, Ph.D.
Dr. Roeland Nusse, Director
/s/ Alpna Seth, Ph.D.
Dr. Alpna Seth, Director
/s/ Randolph C. Steer, Ph.D., M.D.
Dr. Randolph C. Steer, Director
/s/ Charles R. Kummeth
Charles R. Kummeth, Director and Chief Executive Officer (principal
executive officer)
/s/ James Hippel
James Hippel, Chief Financial Officer
(principal financial officer and principal accounting officer)
92
DESCRIPTION OF COMMON STOCK
Exhibit 4.1
The following summary of the common stock, par value $0.01 per share (the “Common Stock”), of Bio-Techne Corporation (the “Company,”
“we,” or “our”) is based on and qualified by our Amended and Restated Articles of Incorporation (the “Articles”) and our Fourth Amended and
Restated Bylaws (the “Bylaws”). For a complete description of the terms and provisions of our Common Stock, refer to the full text of the Articles
of Incorporation and Bylaws, both of which are exhibits to our Annual Report on Form 10-K to which this description is also an exhibit, and the
Minnesota Business Corporation Act (“MBCA”), which is available at https://www.revisor.mn.gov/statutes/cite/302A.
Authorized Shares
The Company is authorized to issue up to 405,000,000 shares, which consists of 5,000,000 undesignated shares and 400,000,000 shares of
Common Stock. As of June 30, 2023, the Company had 157,641,914 shares of Common Stock issued and outstanding.
The Common Stock is the only outstanding class of stock of the Company. The Board of Directors of the Company (the “Board”) is authorized to
establish one or more classes or series of shares from the undesignated shares and to fix the relative rights and preferences of each such class or
series, but the Board has not designated any class or series of shares from the undesignated shares.
Dividend Rights
Subject to the rights of holders of any preferred stock outstanding, holders of Common Stock are entitled to receive dividends when, as, and if
declared by the Board out of net earnings or net assets of the Company that are legally available for the declaration of dividends.
Voting Rights
All voting rights are vested in the holders of shares of Common Stock. Each holder of Common Stock is entitled to one vote per share, and voting
rights are noncumulative. Subject to the rights of the holders of any preferred stock outstanding and except as specifically required otherwise under
the MBCA all matters submitted to Company shareholders are decided by a majority vote of the shares entitled to vote and represented at the
meeting at which there is a quorum, except for election of directors, which is decided by a majority of votes cast in uncontested elections and by a
plurality vote in contested elections.
Liquidation and Dissolution Rights
Pursuant to applicable law, in the event of the Company’s dissolution, the holders of Common Stock will be entitled to share pro rata in any of the
Company’s assets available for distribution after making adequate provision for the discharge of debts, obligations, and liabilities of the Company
and after the holders of any series of outstanding preferred stock have received any liquidation preferences.
Other Shareholder and Board Rights
Holders of shares of Common Stock are not entitled to preemptive rights. The Board may issue rights to subscribe for, purchase, exchange
securities for, or convert securities into, shares of the Company or any class or series, and to fix the terms, provisions and conditions of such rights,
including the exchange or conversion basis or the price at which such shares may be purchased or subscribed for. The Board may effectuate share
dividends or splits by issuance of shares of one class or series to holders of that class or series or to holders of another class or series.
Nominations Procedures
Shareholders can nominate candidates for election to the Board. However, a shareholder must follow the advance notice procedures provided in
Section 2.10 of the Bylaws. In general, for an annual meeting, a shareholder must submit a written notice of such nomination to the Company’s
corporate secretary at least 60 days but not more than 90 days prior to the anniversary of the prior year’s annual meeting. The written notice must
contain the consent of the nominee(s) to serve as director and provide certain information about the proposed nominee(s) and the shareholder
proposing the nomination, as required by Section 2.10 of the Bylaws.
Proposal Procedures
Shareholders may propose that business (other than nominations to the Board) be considered at a meeting of shareholders only if a shareholder
follows the advance notice procedures provided in Section 2.10 of the Bylaws. In general, for an annual meeting, a shareholder must submit a
written notice of the proposed business to the Company’s corporate secretary at least 60 days but not more than 90 days prior to the anniversary of
the prior year’s annual meeting. The written notice must provide certain information about the proposed business and the shareholder proposing
the business, as required by Section 2.10 of the Bylaws..
Limitations on Change of Control
Certain provisions of the Articles, the Bylaws, and the MBCA may discourage, delay, or prevent a merger, acquisition, or other change of control,
including through a change to the members of the Company’s management. These provisions include:
● Advance notice requirements for shareholder proposals and nominations (Section 2.10 of the Bylaws);
● The ability of the Board to amend the Bylaws (Section 9.1 of the Bylaws);
● The ability of the Board to issue purchase rights and additional Common Stock and to designate the terms of and issue new series of
preferred stock without shareholder approval (Article 3 of the Articles);
● Limitations, pursuant to Section 302A.671 of the MBCA, with respect to the voting of shares acquired in a “control share acquisition”;
● The prohibition, pursuant to Section 302A.673 of the MBCA, of business combination transactions involving an “interested
shareholder” and the Company for a period of four years after such individual or entity becomes an interest shareholder, unless a
proscribed approval is obtained; and
● The limitation, pursuant to Section 302A.675 of the MBCA, on purchasing additional shares of Common Stock by a party who has made
a takeover offer for the Company unless holders of Common Stock are able to sell shares on substantially equivalent terms to the prior
takeover offer, unless a proscribed approval is obtained.
Amendment of Articles of Incorporation and Bylaws
The holders of a majority of the outstanding shares of Common Stock have the power to amend the Articles of Incorporation. The Board may
amend, adopt, or repeal the Bylaws, subject to the limitations see forth in our Bylaws and the MBCA. The holders of a majority of the outstanding
shares of Common Stock also have the power to alter or amend, make or adopt, or repeal the Bylaws.
Transfer Agent and Registrar
American Stock Transfer & Trust Company is the transfer agent and registrar for the Company’s Common Stock.
Listing of Common Stock
The Company’s Common Stock is listed on NASDAQ under the symbol “TECH.”
Exhibit 19
Bio-Techne Insider Trading Policy
Effective February 1, 2023
Purpose and Scope
Purpose of the Policy
Insider Trading Policy (this “Policy”) describes the standards of Bio-Techne Corporation and its affiliated companies (together, the
“Company”) on trading of Company securities or securities of certain other publicly traded companies while in the possession of confidential
information. It also addresses additional trading restrictions on all executive officers and members of the Company’s board of directors
(collectively referred to as “Section 16s”).
Persons Subject to the Policy
This Policy applies to all Section 16s and all other employees of the Company and its subsidiaries. The Company may also determine that
other persons should be subject to this Policy, such as contractors or consultants who have access to material Company information. This Policy
also applies to family members, other members of a person’s household and entities controlled by a person covered by this Policy, as described
below.
Transactions Subject to the Policy
This Policy applies to transactions in Company Securities (collectively referred to in this Policy as “Company Securities”), including the
Company’s common stock, options to purchase common stock, or any other type of securities that the Company may issue, including (but not
limited to) preferred stock, convertible debentures and warrants, as well as derivative securities that are not issued by the Company, such as
exchange-traded put or call options or swaps relating to Company Securities. Certain limited exceptions are described below.
The Policy
No Improper Insider Trading
Section 16s and certain other employees of the Company who may have Material Nonpublic Information from time to time, entities
controlled by such persons and members of their immediate family or household are considered insiders under this Policy (“Insiders”). In certain
circumstances, Insiders can also include certain consultants or contractors who might have access to Material Nonpublic Information.
Insiders shall not purchase or sell Company Securities, or offer to do so, during any time that he or she possesses Material Nonpublic
Information (defined below) concerning the Company, and for one business day following public disclosure of that information, or at such time as
such nonpublic information is no longer material. If, for example, the Company were to make an announcement on a Monday before opening of
the trading market, Insiders should not trade in Company Securities until Tuesday.
No “Tipping” Others
Nonpublic information relating to the Company is the property of the Company, and the unauthorized disclosure of such information for
any reason – whether or not related to trading in Company Securities – is barred by obligations of confidentiality to the Company.
Beyond confidentiality obligations to the Company, federal securities laws specifically bar insiders from disclosing (“tipping”) Material
Nonpublic Information to any other person (including family members) where such information may be used to trade in Company Securities.
Insiders also shall not make recommendations or express opinions on the basis of Material Nonpublic Information as to trading in Company
Securities.
Liability for tipping Material Nonpublic Information to another person who trades in Company Securities can be as severe as liability for
directly trading in Company Securities. Moreover, any disclosure of Material Nonpublic Information that results in a third party engaging in a
transaction in Company Securities, when viewed in
hindsight, will appear to be tipping, so Insiders should be extremely cautious with disclosure of Company information.
The same rules regarding tipping Material Nonpublic Information apply to information regarding other publicly traded companies.
Potential Criminal and Civil Liability and/or Company Disciplinary Action
Insiders may be subject to financial penalties and jail time for engaging in transactions in Company Securities at a time when they have
knowledge of Material Nonpublic Information regarding the Company. Insiders may also be liable for improper transactions by any person
(commonly referred to as a “tippee”) to whom they have disclosed nonpublic information regarding the Company or to whom they have made
recommendations or expressed opinions on the basis of such information as to trading in Company Securities. The Securities and Exchange
Commission (“SEC”), the stock exchanges and the National Association of Securities Dealers, Inc. use sophisticated electronic surveillance
techniques to uncover insider trading.
Section 16s and employees of the Company who violate this Policy shall also be subject to disciplinary action by the Company, which
may include ineligibility for future participation in the Company’s equity incentive plans or termination of employment.
Blackout Periods
To ensure compliance with this Policy and applicable federal and state securities laws, the Company has established a quarterly Blackout
Period. Section 16s and certain employees who have been designated by the Company because they have ongoing access to the Company’s
internal financial statements or other Material Nonpublic Information, members of the immediate family or household of any such person, and any
entities controlled by such person (the “Designated Insiders”) may not trade in Company Securities during a Blackout Period.
The Blackout Period in any fiscal quarter typically commences on or about the tenth calendar day of the third fiscal month of the fiscal
quarter and ends one full trading day following the public disclosure of the financial results for that fiscal quarter, which typically occurs with
release of earnings information through a press release and/or filing with the U.S. government. However, the Compliance Officer may choose to
impose a trading restriction at an earlier or later date if the situation is warranted. Designated Insiders may not trade Company Securities during the
Blackout Period and may trade Company Securities outside the Blackout Period only if they do not possess Material Nonpublic Information.
In addition to quarterly Blackout Periods, the Company may determine that an event has occurred which causes any Insider to possess
Material Nonpublic Information about the Company (such as a pending major acquisition). The existence of an event-specific blackout will not be
announced, although those who are aware of the event giving rise to the blackout may be notified. Even if the Company has not declared an event-
specific blackout, no one should trade while aware of Material Nonpublic Information.
Individual Responsibility
Section 16s and employees have the individual responsibility to comply with this Policy against insider trading, regardless of whether the
Company has recommended a trading window to that Insider or any other Insiders of the Company. Each person must exercise appropriate
judgment in connection with any trade in Company Securities.
This Policy applies to immediate family members and household members of executive officers, board of director members and
employees. “Immediate family member” includes a spouse or a minor child, and any other family members whose transactions in Company
Securities are directed by the executive officer, director or employee or are subject to that person’s influence or control, such as adult children or
parents who consult with the executive officer, director or employee before they trade in Company Securities. Immediate family members and
household members should be made aware of this Policy and its restrictions. This Policy does not, however, apply to
personal securities transactions of family members or household members where the purchase or sale decision is made by a third party not
controlled by, influenced by or related to an executive officer, director or employee or his or her immediate family members or household
members.
An Insider may, from time to time, have to forego a proposed transaction in Company Securities even if he or she planned to make the
transaction before learning of the Material Nonpublic Information and even though the Insider believes he or she may suffer an economic loss or
forego anticipated profit by waiting. Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for
an emergency expenditure) are no exception. Even the appearance of an improper transaction must be avoided to preserve our reputation for
adhering to the highest standards of conduct and to avoid an inquiry regarding civil and criminal liability for trading on inside information.
Applicability to Insider Information from Other Companies
This Policy also applies to Material Nonpublic Information relating to other companies, including the Company’s customers, vendors,
suppliers or potential acquisition targets (“Business Partners”), when that information is obtained in the course of employment with, or other
services performed on behalf of, the Company. Civil and criminal penalties and termination of employment may result from trading on inside
information regarding the Company’s Business Partners. All Section 16s and employees must treat Material Nonpublic Information about the
Company’s Business Partners with the same care required with respect to information related directly to the Company.
Definition of Material Nonpublic Information
It is not possible to define all categories of Material Nonpublic Information. However, information should be regarded as material if there
is a reasonable likelihood that it would be considered important to an investor in making an investment decision regarding the purchase or sale of
Company Securities. Any information that could be expected to affect the Company’s stock price, whether it is positive or negative, should be
considered material.
While it may be difficult under this standard to determine whether particular information is material, there are various categories of
information that are particularly sensitive and, as a general rule, should always be considered material. Examples of such information may include:
• Sales results and trends
• Financial results
• Projections of future earnings or losses
• News of a pending or proposed material merger, acquisition or divestiture
• News of the disposition of a material subsidiary
• Gain or loss of a substantial customer or supplier
• New product announcements of a significant nature
• A pending or proposed joint venture
• Significant product defect, recall or modification
• Significant pricing changes
• Stock splits
• New equity or debt offerings
• Developments regarding significant litigation or government agency investigations, including actual or threatened proceedings
• Cybersecurity risks and incidents, including vulnerabilities and breaches
• Changes in executive officers or members of the board of directors
• Changes to dividend or stock repurchase policies
Nonpublic information is information that has not been previously disclosed to the general public and is otherwise not available to the
general public. Generally, material information regarding the Company is made public through the Company's filings with the SEC that are made
available on the SEC’s website, through press releases or newswire services, or through widely-available news sources, such as television, radio,
newspaper, or news websites. By contrast, information would likely not be considered to be publicly available if it is available only to the
Company’s employees, or if it is only available to a select group of analysts, brokers and institutional investors.
Certain Exceptions
Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s plans,
or to a net exercise or tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to
satisfy the exercise price for the option or tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker-
assisted cashless exercise of an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an
option.
Restricted Stock and Restricted Stock Unit Awards. This Policy does not apply to the vesting or lapse of risk of forfeiture of restricted
stock or restricted stock units, or the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold
shares of stock to satisfy tax withholding requirements upon such events. The Policy, including, as applicable, blackout period and pre-clearance
notification provisions, do apply to any market sale of restricted stock.
Employee Stock Purchase Plan. This Policy does not apply to purchases of Company Securities in any employee stock purchase plan
adopted by the Company resulting from a person’s periodic contribution of money to the plan pursuant to an election made at the time of
enrollment in the plan. However, this Policy applies to a person’s election to participate in the plan initially, any subsequent modifications to
increase or decrease the percentage of contributions made, and the termination of contributions for any enrollment period. It also applies to sales of
stock purchased pursuant to the plan.
Other Similar Transactions. Purchases of Company Securities from the Company or sales of Company Securities to the Company are not
subject to this Policy.
Rule 10b5-1 Plans. This Policy does not apply to transactions executed pursuant to a contract, instruction or plan that satisfies Rule 10b5-
1(c) of the Exchange Act, so long as the underlying contract, instruction or plan itself complies with applicable law and regulations as well as any
other requirements established by the Company from time to time. See below for more details.
Administration of the Policy
The Company's General Counsel will serve as Compliance Officer for administration of this Policy. In the absence of the General Counsel
(or if the General Counsel desires to engage in a transaction in Company Securities), the Chief Financial Officer will be responsible for
administration of this Policy. The General Counsel and the Chief Financial Officer may delegate their responsibilities as Compliance Officer as
they deem necessary or appropriate for administration of this Policy.
Any person who has a question about this Policy or its application to any proposed transaction is encouraged to obtain additional
guidance from the Compliance Officer.
All determinations and interpretations by the Compliance Officer shall be final and not subject to further review. Neither the Compliance
Officer nor the Company will be liable for any determinations made under this Policy.
Additional Discouraged and Prohibited Transactions
In order to avoid even the appearance of the use of inside information and to discourage short-term or speculative transactions involving
Company Securities, this Policy strongly discourages, and in some cases prohibits, Insiders from engaging in any of the following activities with
respect to Company Securities:
Short-Term (“Short Swing”) Trading. Pursuant to Section 16(b) of the Securities Exchange Act of 1934, officers and members of the
board of directors must hold Company Securities for at least six months after a purchase, and must refrain from purchasing Company Securities for
at least six months after a sale. All other Insiders are strongly discouraged from engaging in short term trading of Company Securities.
Short Sales. Insiders are prohibited from engaging in short sales of Company Securities (i.e. the sale of shares that the seller does not
own).
Publicly Traded Options. Insiders are prohibited from buying and selling “puts” and “calls” or other derivative securities on Company
Securities.
Hedging Transactions. Insiders are prohibited from engaging in hedging or monetization transactions, such as through equity swaps, collars,
prepaid variable forwards and other similar mechanisms, in connection with Company Securities.
Margin Accounts and Pledging. Insiders are prohibited from holding company securities in a margin account. Pledging Company
Securities as collateral for a loan is also generally prohibited unless the individual is able to clearly demonstrate the financial capacity to repay the
loan without resort to the pledged securities. In that limited situation, the individual requesting the exception must provide appropriate
documentation to the Compliance Officer at least two weeks in advance of the proposed transaction, and the pledging transaction must be
permitted by the Compliance Officer before it may be entered into by the Insider.
Standing Orders. The Company discourages placing standing or limit orders on Company Securities (except standing or limit orders
under Rule 10b5-1 Plans adopted in accordance with the terms of this Policy), whether those standing or limit orders are placed through our on-
line equity management platform or through a brokerage service. If an Insider determines that they must use a standing order or limit order, the
order should be used only for a brief period of time and must otherwise comply with the restrictions and procedures in this Policy. Insiders who
subsequently obtain Material Nonpublic Information must terminate any open standing orders or limit orders unless such orders have been placed
through a Rule 10b5-1 Plan adopted in accordance with this Policy and legal requirements.
Rule 10b5-1 Trading Plans
An Insider who trades in Company stock may have an affirmative defense against a claim of insider trading liability if the trade was made
under a binding contract or written plan that complies with Section 10(b) of the Exchange Act and the corresponding Exchange Act Rule 10b5-1(c)
(the “Plan”). The Plan must be entered into outside of a Blackout Period (if being adopted by a Designated Insider) and when the person adopting
it is not aware of any Material Nonpublic Information concerning the Company. In addition, the Plan must be entered into in good faith and
otherwise comply with the parameters below. Any Rule 10b5-1 Trading Plan must be entered into, and notice provided to the Compliance Officer,
at least 30 calendar days prior to the first transaction to be effected under the plan (“Cooling Off Period”), which period is longer for Section 16s as
discussed below.
In addition, Plans must comply with approved parameters established by the Company from time to time, including, at least one of the
following:
a.
purchased or sold;
Specifying the amount of securities to be purchased or sold and the price at which and the date on which the securities are to be
b.
Including a written formula or algorithm, or computer program, for determining the amount of securities to be purchased or sold
and the price at which and the date on which the securities were to be purchased or sold; or
c.
Prohibiting person adopting the Plan from exercising any subsequent influence over how, when, or whether to effect purchases
or sales, and delegating such discretion to an independent third party.
If the Plan calls for all of the specified securities to be sold in a single trade, an Insider may only have one such single-trade Plan during
any consecutive 12-month period. Persons who adopt a Plan may not deviate from it or engage in any corresponding or hedging transaction or
positions. Amendments to or terminations of the Plan are permitted, provided that (i) the amendment or termination does not occur during a
Blackout Period, (ii) at the time of such amendment or termination, the person undertaking the amendment or termination does not have any
Material Nonpublic Information regarding the Company, (iii) the first transaction under the amended Plan does not occur until at least 30 calendar
days after providing notice of the amendment to the Compliance Officer, and (iv) if the plan is being terminated, the first transaction outside of the
Plan adheres to the Cooling Off Period requirements. Material modification of a Plan will be treated as adoption of a new Plan for purposes of the
Cooling Off Period requirements.
An Insider may not have more than one Plan in effect at any given time. If an Insider has a Plan in effect, transactions outside that Plan
are discouraged.
Regulations governing structure and implementation of Plans are complex. Insiders are advised to consult with the Compliance Officer or
their own attorney prior to adopting a Plan.
Additional Plan Requirements and Restrictions for Section 16s
For Section 16s, the Cooling Off Period referred to above is the later of: (a) at least 90 calendar days prior to the first transaction or (b) 2
business days following disclosure of financial results in periodic reports filed with the SEC, but in either case not to exceed 120 days following
Plan adoption. Section 16s must include a certification in their Plan documentation certifying that at the time of adoption of a Plan they are not
aware of Material Nonpublic Information and they are adopting the Plan in good faith and not as part of a scheme to evade the prohibitions of the
law and regulations. The Company will disclose Plans established by Section 16s, as well as trades made under such Plans, as required by the SEC.
Additional Pre-Clearance Procedures for Section 16s
To provide assistance in preventing inadvertent violations and avoiding even the appearance of an improper transaction (which could
result, for example, where a person engages in a trade while unaware of a pending major development), Section 16s, as well as members of their
immediate family and entities controlled by them, that contemplate engaging in any transaction in Company Securities to which this Policy
applies, must notify the Compliance Officer at least two business days in advance of the proposed transaction, stating the amount and nature of the
proposed trade.
A person making a pre-clearance request must not be aware of any Material Nonpublic Information about the Company. The person must
inform the Company if he or she has effected any non-exempt “opposite-way” transactions within the past six months. After any transaction, the
person must timely inform the Company to assist with the filing of the requisite Form 4, and should also be prepared to comply with SEC Rule 144
and file Form 144, if necessary, at the time of any sale. In order to comply with these important legal requirements, any Section 16s seeking pre-
clearance must transact in Company Securities only through a full-service brokerage firm.
The Compliance Officer is under no obligation to permit a transaction submitted for pre-clearance and may determine not to permit the
transaction. If permission to engage in the transaction is denied, the requesting person should not initiate any transaction in Company Securities,
nor inform others of the restriction. If permitted, clearance
is good for five (5) business days unless otherwise notified. Pre-clearance is not required for purchases or sales under an approved Plan. Insiders
remain personally responsible for any transactions in Company Securities, regardless of whether they are permitted by the Compliance Officer.
Post-Termination Transactions
This Policy continues to apply to transactions in Company Securities even after an Insider has terminated employment or other services to
the Company. If an Insider is in possession of Material Nonpublic Information when his or her service terminates, the Insider may not trade in
Company Securities until that information has become public or is no longer material.
Pre-clearance notification procedures discussed above will cease to apply to Company Securities upon the expiration of any Blackout
Period or any other Company-imposed trading restrictions applicable at the time of the termination of service. 9
Certification
Section 16s and other employees and other Company representatives may be required on a periodic basis to certify their understanding of
and intent to comply with this Policy. Designated Insiders may be required on a periodic basis to provide an additional acknowledgement regarding
the Blackout Period and, as applicable, pre-clearance notification provisions of this Policy.
Any person who has any general questions about this Policy or questions about specific transactions should contact the Compliance
Officer.
2
Bio-Techne Corporation, a Minnesota corporation, had the material subsidiaries below as of the date of filing its Annual Report on Form 10-K for fiscal year ended
June 30, 2023. Certain subsidiaries are not named because they were not significant individually or in the aggregate as of such date. Bio-Techne Corporation is not a
subsidiary of any other entity.
Exhibit 21
Name
Research and Diagnostic Systems Inc. (R&D Systems)
Bio-Techne China Co. Ltd
ProteinSimple
ProteinSimple Ltd.
Novus Biologicals, LLC
Bio-Techne Ltd.
Advanced Cell Diagnostics, Inc.
Exosome Diagnostics, Inc.
Asuragen, Inc.
Cyvek, Inc
State/Country of Incorporation
Minnesota
China
Delaware
Canada
Delaware
United Kingdom
California
Delaware
Delaware
Delaware
Consent of Independent Registered Public Accounting Firm
Exhibit 23
We consent to the incorporation by reference in the registration statements (No. 333-49962, 333-170576, 333-199847, 333-207710, 333-221143, 333-228222, and 333-
249974) on Form S-8 of our reports dated August 23, 2023, with respect to the consolidated financial statements of Bio-Techne Corporation and subsidiaries and the
effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Minneapolis, Minnesota
August 23, 2023
I, Charles R. Kummeth, certify that:
1.
I have reviewed this annual report on Form 10-K of Bio-Techne Corporation;
CERTIFICATION
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and
have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: August 23, 2023
/s/ Charles R. Kummeth
Charles R. Kummeth
Chief Executive Officer
I, James Hippel, certify that:
1.
I have reviewed this annual report on Form 10-K of Bio-Techne Corporation;
CERTIFICATION
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and
have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a.
b.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: August 23, 2023
/s/ James Hippel
James Hippel
Chief Financial Officer
BIO-TECHNE CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Bio-Techne Corporation (the “Company”) on Form 10-K for the year ended June 30, 2023 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, Charles R. Kummeth, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Charles R. Kummeth
Charles R. Kummeth
Chief Executive Officer
August 23, 2023
BIO-TECHNE CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Bio-Techne Corporation (the “Company”) on Form 10-K for the year ended June 30, 2023 as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), I, James Hippel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ James Hippel
James Hippel
Chief Financial Officer
August 23, 2023
Board of Directors
Annual Meeting
Robert V. Baumgartner
Chairman of the Board and Director
Charles R. Kummeth
President, Chief Executive Officer and Director
The annual meeting of shareholders of
Bio-Techne Corporation
will be held via a live webcast available at:
virtualshareholdermeeting.com/tech2023
Thursday, October 26, 2023, 8:00 a.m. Central Time
TECH is Bio-Techne Corporation’s Nasdaq stock symbol,
which is listed on the Nasdaq Global Select Market.
Julie L. Bushman
Director
John L. Higgins
Director
Joseph Keegan, Ph.D.
Director
Roeland Nusse, Ph.D.
Director
Alpna Seth, Ph.D.
Director
Randolph C. Steer, M.D., Ph.D.
Director
Rupert Vessey, M.A., B.M.,
B.Ch., F.R.C.P., D. Phil.
Director
Executive Officers
Charles Kummeth
President and Chief Executive Officer
James Hippel
Executive Vice President and
Chief Financial Officer
Will Geist
President, Protein Sciences
Kim Kelderman
President, Diagnostics and Genomics
Shane Bohnen
Senior Vice President, General Counsel,
Secretary and Chief Compliance Officer
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