Bio-Techne Holds Revenue Flat, Eyes Margin Gains and China Momentum

Date of Call: Feb 4, 2026

Financials Results

• Revenue: $295.9 million, flat year-over-year on both organic and reported basis. Foreign exchange contributed a 2% tailwind, while businesses held for sale created a 2% headwind.
• EPS: Adjusted EPS $0.46, up 10% year-over-year. GAAP EPS $0.24, up from $0.22 in the prior year period.
• Gross Margin: Adjusted gross margin 68.5%, down from 70.5% last year, driven by unfavorable product and customer mix.
• Operating Margin: Adjusted operating margin 31.1%, up 100 basis points year-over-year.

Guidance:

• Overall Q3 organic growth expected to be consistent with Q2. Excluding customer-specific headwinds (cell therapy and OEM order timing), underlying growth for the remainder of the business expected to be mid-single digits.
• Expect continued improvement in Q4 and a great start to fiscal year 2027, with underlying business momentum building.
• Targeting 100 basis points of operating margin expansion for the full fiscal year.

Business Commentary:

Revenue and Market Dynamics:

• Bio-Techne reported total revenue for Q2 of fiscal 2026 as $295.9 million, flat year-over-year on both organic and reported bases.
• The flat revenue growth was influenced by a soft biotech end market, a stable U.S. academic market, and temporary order timing impacts from two large cell therapy customers receiving FDA Fast Track designations.

Segment Performance and Growth Verticals:

• The Protein Sciences segment, which includes core reagents and proteomic analytical tools, reported $215.1 million in sales, a 2% increase year-over-year.
• Growth was driven by strong demand from large pharma customers and new product introductions, despite a decline in the cell therapy segment due to reduced near-term GMP reagent demand from the two FDA Fast Track customers.

Geographic Performance and Market Conditions:

• Revenue in China grew mid-single digits, marking the third consecutive quarter of growth, while the APAC region excluding China grew almost 20%.
• Growth in China was supported by R&D investments from CDMO, CRO, and biotech customers working on advanced therapies, despite a challenging environment in the U.S. academic and biotech markets.

Operating Margin Expansion:

• Bio-Techne's adjusted operating margin expanded by 100 basis points year-over-year to 31.1%.
• This expansion was driven by the exosome diagnostics divestiture and productivity gains, partially offset by unfavorable product mix and customer mix pressures.

Outlook and Strategic Positioning:

• The company anticipates Q3 organic growth to be consistent with Q2, with underlying growth for the remainder of the business expected to be mid-single digits.
• The positive outlook is supported by stabilization in biotech funding, favorable NIH funding developments, and the expectation that headwinds from the FDA Fast Track designations will moderate.

Sentiment Analysis:

Overall Tone: Positive

• Management expresses confidence in the durable moat of the core portfolio and competitive positions across growth verticals. They note stabilization and gradual improvement in end markets, with strong momentum in China and APAC, and are 'very positive' about the cell therapy business and future opportunities. Kim Kelderman states, 'I remain confident in the durable moat surrounding our core portfolio and in our competitive positions.'

Q&A:

• Question from Matt LaRue (William Blair): Following up on growth cadence, is the message that for calendar 2026, ex-items, underlying growth is expected to be mid-single digits with improvement throughout the year?
  Response: Yes, underlying organic growth excluding specific customer headwinds is expected to be mid-single digits, building through the year.

• Question from Matt LaRue (William Blair): On gross margins, why were they down sequentially and how should they trend for the balance of the year?
  Response: Sequential decline due to unfavorable product and customer mix (e.g., reagents vs. instruments mix, lower-margin OEM customers in diagnostics). Expect mix to gradually improve in Q3 and Q4.

• Question from Dan Leonard (UBS): Given AI's impact, what are your team's thoughts on its effect on biotech demand?
  Response: AI is seen as a tailwind, helping customers be more specific in their material needs and driving demand for more complex molecules, which plays into Bio-Techne's core strengths.

• Question from Puneet Souda (Leerink Partners): What organic growth rate should be expected exiting the year and any thoughts on 2027?
  Response: Exit year with strong underlying momentum; Q4 organic growth expected to be mid-single digits. For 2027, not providing guidance but underlying business trends are very encouraging.

• Question from Puneet Souda (Leerink Partners): What's driving the strong growth in China versus peers?
  Response: Driven by China's 15th five-year funding plan prioritizing life science, successes in local biotech exits, and improved activity in CDMO and CRO sectors.

• Question from Patrick Donnelly (Citigroup): On biotech, what's the timing of funding improvement showing up in revenue?
  Response: Typically a 6-month lag; expects a bell curve with reagent orders quicker and CapEx later, with funding already showing signs of improvement.

• Question from Patrick Donnelly (Citigroup): On cell therapy customers, when do you expect GMP business to normalize and return to high growth?
  Response: Headwind expected to moderate to ~300 bps in Q3, ~100-200 bps in Q4, then reset. Underlying business grew 30% last quarter, expected to return to normalized growth.

• Question from Dan Arias (Stifel): Does the Q4 mid-single-digit growth outlook assume academic/biotech are growing, or just pharma strength and normalized GMP customer spending?
  Response: Can be achieved largely without significant step-up in the two cell therapy customers, but any improvement would be upside.

• Question from Dan Arias (Stifel): On spatial biology, what's the pull-through rate for Comet consumables and outlook for 2026?
  Response: Current pull-through ~$45K per instrument per year; aiming for ~$90K per box per year over time as multiomic adoption grows, but it's a multi-quarter to multi-year trend.

• Question from Steven Etoch (Stephens Inc.): Update on interest for organoid offerings and revenue generated?
  Response: Organoids is a ~$50 million run rate business, growing in a $1.4 billion market. Launched new animal-free product (Cultrex Synthetic Hydrogel) to support growth.

• Question from Steven Etoch (Stephens Inc.): How are you thinking about M&A valuations and potential strategic fits?
  Response: Focused on strategic fits in novel antibodies, cell therapy, and proteomic analysis. Actively working on integrating Wilson Wolf acquisition; looking at other opportunities, both public and private.

• Question from Brandon Couillard (Wells Fargo): On operating margin expansion, why is guidance unchanged despite mix headwinds, and how will margins trend in second half?
  Response: Expect sequential margin expansion in H2, with roughly half from gross margin improvement and half from higher revenue. Full year target remains 100 bps expansion.

• Question from Brandon Couillard (Wells Fargo): Why was operating cash flow down meaningfully in first half, and outlook for full year?
  Response: Q1 cash outflow impacted by higher bonus accruals and timing of tax payments; Q2 was strong. Full year cash flow expected to be on par with prior year.

Contradiction Point 1

Cell Therapy Customer Headwind Magnitude and Timing

Inconsistent sizing and phasing of revenue headwinds from FDA Fast Track designations.

What is the impact of the two FDA Fast Track customers on cell therapy, and when will the GMP business normalize and return to over 20% growth? - Patrick Donnelly (Citigroup)

2026Q2: The two customers created a ~200 bps headwind in Q1 and ~400 bps in Q2. Impact expected to moderate to ~300 bps in Q3, ~100–200 bps in Q4, then reset. - Kim Kelderman(CEO)

How long will the air pocket in GMP protein sales persist due to the FDA Fast Track timing, and what is the growth outlook following over 30% growth last year? - Daniel Leonard (UBS Investment Bank)

2026Q1: Q1 saw a ~200 bps headwind, and Q2 is expected to see a 400 bps headwind as these customers progress through Phase III trials. The headwind is expected to fade in the second half of the fiscal year. - Kim Kelderman(CEO)

Contradiction Point 2

Operating Margin Expansion Target for FY2026

Shift from a specific full-year target to a broader sequential outlook.

Given the operating margin expansion outperforming H1 but only a 100 bps full-year guidance, is reinvestment planned in H2? Please unpack the margin trend. - Brandon Couillard (Wells Fargo)

2026Q2: Full-year H2 expansion expected to be 100 bps. - Jim Hipple(CFO)

How does the Q2 margin outlook affect EBIT margin, assuming -1% organic growth? - Kyle Boucher (TD Cowen)

2026Q1: This provides confidence in achieving at least 100 bps of full-year margin expansion. - James Hippel(CFO)

Contradiction Point 3

Full-year Growth Outlook

Contradiction on whether FY2026 organic growth is confirmed as low single-digit.

Is the underlying growth for calendar 2026, excluding items, expected to be mid-single digits with improvement throughout the year? - Matt LaRue (William Blair)

2026Q2: Confirmed that excluding customer-specific headwinds, underlying organic growth is expected to be mid-single digits for the year... Full-year view remains low single digits. - Jim Hipple(CFO)

Are you expecting low single-digit for FY26? - Puneet Souda (Leerink Partners)

2025Q4: The outlook is for low single-digit organic growth to continue until uncertainties... This does not necessarily mean the full fiscal year 2026 will be low single-digit. - James T. Hippel(CFO)

Contradiction Point 4

Margin Expansion Drivers

Contradiction on the primary driver for achieving 100 bps of operating margin expansion.

Given H1 outperformance and a 100 bps full-year guidance, is reinvestment planned in H2, and what drives the margin trend? - Brandon Couillard (Wells Fargo)

2026Q2: Margin expansion expected sequentially in H2, driven roughly half by gross margin mix improvement and half by higher revenue. - Jim Hipple(CFO)

Would you still commit to the "market plus 500 basis points" growth target, and how can you achieve 100 bps of operating margin expansion with low single-digit growth? - Dan Leonard (UBS)

2025Q4: The 100 bps of margin expansion in fiscal 2026 is primarily driven by the divestiture of the Exosome Diagnostics business... - James T. Hippel(CFO)

Contradiction Point 5

Growth Outlook for Cell Therapy

Contradiction on the growth rate for the core cell therapy business excluding major customers.

What is the impact of the two FDA Fast Track customers on cell therapy, and when is the GMP business expected to normalize and return to >20% growth? - Patrick Donnelly (Citigroup)

2026Q2: Underlying cell therapy business (ex-two customers) grew ~30% in Q2. - Kim Kelderman(CEO)

Will the reinvestment from the ExoDx divestiture impact the top line amid margin expansion and low single-digit growth? Additionally, is the strong cell & gene therapy growth (Wilson Wolf +20%) consistent across the portfolio? - Daniel Markowitz (Evercore ISI)

2025Q4: The ~20% growth in Wilson Wolf was similar across the broader cell & gene therapy portfolio. - James T. Hippel(CFO)