Good morning, and welcome to the Bio-Techne Earnings Conference Call for the Fourth Quarter of Fiscal Year 2022. At this time, all participants have been placed in a listen-only mode and the call will be opened for questions following management's prepared remarks. During our Q&A session, please limit yourself to one question and a follow-up. I would now like to turn the call over to David Clair, Bio-Techne's Vice President, Investor Relations and Corporate Development. Please go ahead.

Good morning, and thank you for joining us. On the call with me this morning are Chuck Kummeth, Chief Executive Officer; and Jim Hippel, Chief Financial Officer of Bio-Techne. Before we begin, let me briefly cover our Safe Harbor statement. Some of the comments made during this conference call may be considered forward-looking statements, including beliefs and expectations about the company's future results, as well as the potential impact of the COVID-19 pandemic on our operations and financial results. The company's 10-K for fiscal year 2021 identifies certain factors that could cause the company's actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements because of any new information or future events or developments. The 10-K, as well as the company's other SEC filings, are available on the company's website within its Investor Relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to the most comparable GAAP measures are available in the company's press release issued earlier this morning on the Bio-Techne Corporation website at www.bio-techne.com. Separately, we will be presenting at the Wells Fargo, Baird and Morgan Stanley Healthcare Conferences in September. We look forward to connecting with many of you at these upcoming conferences. I will now turn the call over to Chuck.

Thanks, Dave and good morning, everyone. Thank you for joining us for our fourth quarter conference call. We had a tremendous finish to our fiscal 2022 as our 14% organic growth for the fourth quarter capped off the year where we delivered 17% organic growth for the full fiscal year. In fiscal 2022, we surpassed an important milestone as we exceeded $1 billion—in actually $1.1 billion in revenue for the first time in our corporate history. These strong results were delivered in the face of the most challenging comparison the company has faced since I joined in 2013 and the impact of a longer than expected COVID-related shutdown in China. I'm extremely proud of the global team's strong execution in this dynamic environment. Some of the highlights in the quarter include continued strength in our biologics instrument portfolio, as we delivered over 30% growth for the seventh consecutive quarter. We are seeing ongoing traction with our cell and gene therapy workflow initiatives, a return to double-digit growth in our spatial biology business, as well as another consecutive record-setting quarter for ExoDx prostate tests. We remain incredibly well-positioned and under-penetrated in some of the fastest growing life science tools and diagnostics markets. In our portfolio, proteomic, genomic and diagnostic products continue to deliver the solutions necessary to drive scientific discoveries and ultimately improve healthcare. Given the inflationary environment we are all dealing with, let's briefly discuss how we are successfully navigating these challenges. As a reminder, approximately 80% of our revenue mix is consumables, and encouragingly, given their biological nature, these tend to have more modest raw material costs. Approximately 10% of our sales are instrumentation, where we do have higher input costs, but we still maintain gross margins in line with corporate averages. We have been strategically implementing price increases throughout our portfolio to offset our exposure to rising costs, including labor, and will continue to pull this lever going forward. Speaking of labor, we made significant progress in our human capital initiatives in the quarter. Encouragingly, we are seeing signs of an improving labor market as some of the headwinds we faced in recent quarters to attract and retain talent appear to be subsiding. In fiscal 2022, we added over 400 individuals to the team and have grown to over 3,000 Bio-Techne team members. These net headcount additions were made across the organization as we strengthen the commercial, technical and corporate teams at all levels. We will continue to hire as we execute our strategic growth initiatives going forward. I'm very encouraged with the recent progress on this front. Now let's discuss the specifics of our performance this quarter, starting with our geographies and end markets...

Thank you, Chuck. I will provide an overview of our Q4 and fiscal 2022 financial performance for total company, provide some additional details on the performance of each of our segments, and then give some thoughts on the fiscal year ahead. Starting with the overall fourth quarter financial performance, adjusted EPS was $2.05 versus $1.88 one year ago, an increase of 9% over last year. Foreign exchange negatively impacted adjusted EPS by $0.10 or minus 5% in the quarter. GAAP EPS for the quarter was $1.51 compared to $0.37 in the prior year. The biggest driver for the increase in GAAP EPS was unrealized losses on our investments in ChemoCentryx in the prior year. Q4 revenue was $288.2 million, an increase of 11% year-over-year on a reported basis and 14% on an organic basis. Foreign exchange translation had an unfavorable impact of 3% to revenue growth. For the full fiscal year 2022, revenue was $1.1 billion, an increase of 19% on a reported basis and 17% on an organic basis. Foreign exchange translation had an unfavorable impact of 1%, and acquisitions had a stable impact of 3%. Moving on to the details of the P&L, total company adjusted gross margin was 73.2% in the quarter compared to 72.7% in the prior year. The increase was driven primarily by favorable business mix, and productivity gains, partially offset by the impact of foreign exchange. Adjusted SG&A in Q4 was 27.8% of revenue, compared to 25.9% in the prior year, while R&D expense in Q4 was 8.1% of revenue compared to 8% in the prior year. The increase in SG&A was due to progress we made in a quarter building the team to position the company for growth going forward, including adding commercial and technical talent. The resulting adjusted operating margin for Q4 was 37.4%, a decrease of 140 basis points from the prior year period. Excluding the impact of foreign exchange, adjusted operating margin was approximately in line with the prior year. For the full fiscal year 22, adjusted operating margin was 38.3%, a decrease of 80 basis points year-over-year. Looking at our numbers below operating income, net interest expense in Q4 was $2.2 million, decreasing $0.8 million compared to the prior year period. The decrease was due to a continued reduction of our bank debt. Our bank debt in the balance sheet as of the end of Q4 stood at $255.9 million. After the quarter, we did draw down approximately $100 million in our existing line of credit for the recently completed MSL acquisition which, together with higher floating interest rates, is expected to add approximately $1.4 million to our quarterly interest expense in the first quarter of fiscal year '23. Other adjusted non-operating income was $1.3 million for the quarter compared to $0.7 million in expense in the prior year, primarily reflecting the foreign exchange impact related to our cash pooling arrangement. For GAAP reporting, other non-operating income includes unrealized losses from our investment in ChemoCentryx. Moving further down the P&L, our adjusted effective tax rate in Q4 and for the full fiscal year was 21.2%. Turning to cash flow and return of capital, $102.7 million of cash was generated from operations in the quarter, and our net investment in capital expenditures was $13.6 million. Also during Q4, we returned capital to shareholders by way of $58.8 million in stock buybacks and $12.5 million in dividends. We finished the quarter with 40.7 million average diluted shares outstanding. Our balance sheet finished Q4 in a very strong position with $247 million in cash and short-term available for sale investments, keeping our net debt position negligible at the end of the fiscal year. Next, I'll discuss the performance of our reporting segment starting with the protein sciences segment. Q4 reported sales were $217 million, with reported revenue increasing 13%. Organic growth for the segment was 16%, with foreign exchange having an unfavorable impact of 3%. Within the segment, the growth was very broad-based across nearly all reagent assay and instrument platforms. Our portfolio of cell and gene therapy workflow solutions increased over 50%. Our ProteinSimple branded instruments and consumables increased in the upper teens. And our RUO proteomics research reagents grew in the low teens. Operating margin for the protein sciences segment excluding the impact of partially owned consolidated subsidiaries is 45.5%, a decrease of 170 basis points year-over-year with favorable volume leverage and productivity gains more than offset by the impact of foreign exchange and strategic investments to support future growth.

Thank you. Our first question comes from Puneet Souda with SVB Securities. Please proceed.

Yes. Hi. Thanks, Chuck. Jim, thanks for taking the question. So first of all, congratulations on a solid print here, despite the challenges in China. So maybe Chuck given the transition, I think it's, I mean, first of all, it's fair to say that you've done a phenomenal job or in portfolio transformation and the top-line growth, which is in mid-teens and $1.1 billion in operating profile that is reflecting a 40% off margin. So that's, I mean, just great to see across the life science tools industry. So, I mean, I wish you well on your retirement, but maybe just walk us through, sort of what went into this decision and maybe talk to us about the overall organization today. I mean, you have a target of $2 billion by FY '26. You're pivoting more into cell and gene therapy. So potentially, there's a lot to be excited about. But how are you thinking about the overall organization and what needs to happen in order to deliver that target by FY '26?

I believe we should continue with our current strategy. We achieved impressive growth of 17% this past year, and we will provide our typical guidance for the upcoming year, which will definitely start with double digits. By the end of our cycle in 2026, we're confident we will reach that 17% rate, which is essential for hitting our $2 billion target. Our team has been developing over the nearly 10 years I've been here, and with the retirement of a key individual last year, we've brought in personnel with strong expertise in the emerging areas we're focusing on, especially cell and gene therapy. Our bench is prepared. Jim, who has a decade of experience less than I do, has a long path ahead and we have solid internal candidates, but the board will also explore external options, as they have discussed. We plan a gradual transition over the next two years, so changes will not happen overnight. My intention is to remain on the Board to help guide us towards our $2 billion goal. My main concern is finding a suitable successor. During my time, we've seen 500% growth, and the person who follows me needs to have the vision to expand our revenue significantly from half a billion to between $7.5 billion and $10 billion. Given that we currently have a smaller market share in the areas we serve, I see no obstacles to making this company an exceptional one and a leading force in the life science tools and diagnostic market going forward.

Yes, Puneet, I'll just add, I mean, we've got—capital is not an issue. We're sitting at pretty much net debt zero, as of the end of June 30. We just did an MSL acquisition. And assuming we do some will hear by the end of the calendar year, and with the operating cash flow we regenerate in the meantime, we'll still probably be at or less than a one-time turn. And as we've said before, we're very comfortable going up to north of three for the right deals, so capital will not be an issue.

Hey, thanks. Good morning and Chuck congratulations on all you've accomplished over the last couple of years and on the retirement announcement that I think you're still stuck with us for another seven quarters. On the biopharma end market, Jim mentioned you guys are keeping an eye on the biotech sector. Can you just talk about, are you seeing any signs of a slowdown from activity in that end market? It doesn’t sound like it. The biopharma was strong, but just any thoughts there? And then as we think about your portfolio, if we continue to see financing be sluggish, just kind of talk about how you view that maybe impacting some of your key segments?

Yes, sure. We finished the quarter very strong and as we've mentioned in the past, we haven't seen too much degradation in any of our markets. We finished in the U.S. biopharma around 30% growth, and academia keeps trickling north, showing our near high single-digit growth for the quarter in the U.S., better than that in Europe again, teens. But we are looking forward, it's kind of hard to answer because looking now from July. July is kind of soft for us anyway, as for everyone, and it gets—it's different year-on-year. I do think that this is a year where a lot of people are tired and traveling and taking off for the first time. So I think we're seeing some of that. What we'll see right now, we see strong continuing momentum in biopharma; you are specifically asking about biotech. But I think most of the markets are still doing fine. You've seen our peers make the same kinds of statements. But it's hard to really make the statement going into July and August. What I do know in some of our areas, especially like exosomes, this is one that is the softest time of the year for them anyway, so things like that, but we'll know more in about a month or so. We're not too concerned yet, as things are kind of like we usually see about this time of year.

The only thing I would add there, Jacob is, keeping in mind that our core business is reagents and relatively low dollar instrumentation that adds the productivity. So if there is any kind of slowdown in biotech, usually it's the high capital expenditure items that we'll see at first, and as long as they continue to do their experiments, they're going to still need our reagents and our value add low-cost instrumentation. So the risk I think is lower for us.

Good morning, guys. Thanks for the questions. Chuck, maybe on ACD. Good to see a return of double-digit growth there. I have you at right around 10% growth for the year. The long-term CAGR that you outlined at the Analyst Day is mid-20s. So for that portfolio, how do you think fiscal 23 growth fits into the trajectory there? And then relatedly, Jim, how much of the hiring that you've highlighted as necessary for that business have you been able to complete at this point?

Yes. I can cover both because it's not much change from last quarter in hiring. So we're at full strength, and we're literally hiring more. I promised a return and we were there. There have been new leadership changes for going on six months now, the leadership is fantastic. And we're back in the teens and will drift our way back to north of 20 here. It's only 10 for the year, because of a couple of soft quarters, which we had to make changes. We lost a lot of people on the sales front, which we have recovered from. We've done other initiatives, like I've mentioned in the past, like giving equity to our salespeople, and that’s helped a lot. This is a very technical sale. So these people we have in the field in this area are incredibly strong in their domain knowledge. So it's not an overnight replacement situation. But we've been there for a quarter now at full strength and the results are showing themselves. Same thing in Europe, I'd say Europe is a little behind the U.S., and there is a service component to this business too. That's a longer sales cycle. And so we're busy trying to get that back on track as well, in which we're seeing strong improvement. So our thesis is 24%, I think we are having the $2 billion model. We think we're there. Remember, we're still on discoveries, this is translational from discovery to translational. We've got automation coming out, like we got new products coming. And we haven't done much to crack pathology. There's a lot of pathology in our future with this platform as well. So we stand behind our guns here saying this is a $300 million kind of business, it should be and to hit $300 million is north of 24%. We are pretty bullish on this platform. It is the largest spatial business out there right now. It continues to be. We understand where the target is—

Hi, guys. Thanks for the questions. And I will echo the earlier comments about your retirement, but glad we get a little bit longer with you. Was hoping you could give a little more color on what you're seeing in China. I think after the initial COVID lockdowns, you saw some stocking once customers returned to the bench. So is that something you're expecting to happen in your fiscal first quarter?

Coming off the COVID, the super weak quarter, we had this amazing surge from all that restocking and redoing experiments. It surprised everyone in the industry how fast China came back. We had a record year last year, and we're still north of 20 for the year. Looking forward, this is still a 25% growth engine, even though now we're north of $100 million in base. I think there will be some stocking here. I don't think we're out of the woods here on turning it all back on. There are a lot of academic institutions that are not coming back online until after the elections in October. So, there's going to be a continual lift in China. We're very bullish and we don't see any concerns there. It was just a soft quarter for us. We all knew it would be. It can't be shut down for two months out of three and not have an impact. Yet, we are still near flat. The snap back is coming back pretty well. Our warehouse was in Shanghai, so that affected all of China for us. As long as we keep our warehouse open, I think that's good news for how we serve China for the rest of the country. We will build our way back, letting off the hook for another very strong plan for this coming year. We're very bullish on it.

Great. Good morning, everyone. I'm just hoping we could speak to the expectations for overall growth range in the new fiscal year, as we talked about in the Q&A session. We got a couple of crosscurrents. We got China kind of coming back online, maybe not full strength, but it's recovering, maybe a more questionable funding environment for the life science projects. And then you still got this high-growth cell gene therapy business. So just how are you thinking about growth throughout this year, the cadence throughout this year?

Yes. So the plan this year is kind of like last year, we'll start out a little softer and very strong, just like we did. The comps are still tough for us in Q1, and they get a little better for us going forward. But not that much better. This is an aggressive business, and we're a double-digit player now; we expect to continue. As you know, Alex, we don't give real guidance, at least we don't give quarterly. But we think that our range for this coming year is probably something 11% to 12% up to mid-teens in that range. We'll keep you posted as we do better. As you mentioned, China's still being a little softer as we go forward to fully turn on, which is more like Q2, and other situations out there, we'll see. We have other things that are counteracting these possible slowdowns, I mean, Exosome has been lighting up. You guys aren’t asking about that, but it was a tremendous quarter with 70% test growth, 40% organic growth, over 7,000 tests. We are just killing it. This is their time and it’s going to take off. We're going to an accrual methodology pretty soon here as well, if not this coming quarter. It's time. The reconsideration is going to really allow us to double the total addressable market for us. We've got 75,000 tests that have occurred out there in the past that are all waiting for a reoccurrence. A lot of upside there. We just talked about spatial; spatial is back in the groove. It’s already a $100 million business in that range. It’s material. As long as our core stays where it is and proteomics is still strong, biopharma, it’s 30% kind of growth rates. We see an amazing double-digit year ahead of us; we're not going to get more bullish than mid-teens at this point, but we never do.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day everyone.