ITEM 2. 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 both the unaudited Condensed Consolidated Financial Information and related Notes included in this Form 10-Q, and MD&A of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended June 30, 2025.
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” and “Forward-Looking Information and Cautionary Statements” located at the end of Item 2 of this report.
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 biotechnology reagents, instruments and services for the research and clinical diagnostic markets worldwide. We use our deep product portfolio and application expertise to develop and 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 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 expand our prescence in diagnostics and other adjacent markets. The Company’s strategic pillars for long-term growth and profitability are to grow and leverage the core, capitalize on high potential markets, market expansion through innovation and acquisition, deliver best-in-class customer experience, and develop people through a transformative culture.
Our Protein Sciences segment is a leading developer and manufacturer of high-quality purified proteins and reagent solutions, most notably cytokines and growth factors, antibodies, immunoassays, biologically active small molecule compounds, tissue culture reagents and T-Cell activation technologies. This segment also includes protein analysis solutions that offer researchers efficient and streamlined options for protein characterization, automated western blot and multiplexed ELISA workflow. Our Diagnostics and Spatial Biology segment develops and manufactures diagnostic products, including FDA-regulated controls, calibrators, blood gas and clinical chemistry controls and other reagents for OEM and clinical customers, as well as a portfolio of clinical molecular diagnostic carrier screening and oncology assays. This segment also manufactures and sells fully automated multiomic spatial biology instrumentation and advanced tissue-based in-situ hybridization assays (ISH) for research and clinical use.
RESULTS OF OPERATIONS
Net Sales
T1Consolidated net sales for the quarter ended March 31, 2026 decreased 2% to $311.4 million compared to the same prior year period. Consolidated net sales for the nine months ended March 31, 2026 were $893.8 million, a decrease of 1% from the same prior year period. Organic revenue for the quarter ended March 31, 2026 decreased 2% compared to the prior year. Foreign currency exchange had a favorable impact of 2% and non-recurring prior year revenue from a business held-for-sale had an unfavorable impact of 2%. Organic revenue for the nine months ended March 31, 2026 decreased 1% compared to the prior year. Foreign currency exchange had a favorable impact of 2% and non-recurring prior year revenue from a business held-for-sale had an unfavorable impact of 2%.
Organic revenue for the quarter ended March 31, 2026 was primarily driven by unfavorable volume and product mix in our Protein Sciences segment, partially offset by favorable performance in our Diagnostics and Spatial Biology portfolio.
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Gross Margins
T2Consolidated gross margins for the quarter and nine months ended March 31, 2026 were 66.9% and 65.7%, respectively, compared to 67.9% and 65.5% for the same prior year periods. Excluding the impact of costs recognized upon the sale of acquired inventory, amortization of intangibles, stock-based compensation expense, restructuring and restructuring-related expenses, and the impact of a business held-for-sale, adjusted gross margins for the quarter and nine months ended March 31, 2026 were 70.4% and 69.7%, respectively, compared to 71.6% and 70.6% for the quarter and nine months ended March 31, 2025, respectively. Fluctuations in consolidated gross margin and adjusted gross margin, as a percentage of sales, have primarily resulted from 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.
A reconciliation of the reported consolidated gross margin percentages, adjusted for acquired inventory sold, intangible amortization, stock compensation expense, restructuring and restructuring-related charges, and the impact of a business held-for-sale included in cost of sales, is as follows (in thousands):
Quarter Ended
Nine Months Ended
March 31,
March 31,
2026
2025
2026
2025
Total consolidated net sales
$
311,415
$
316,181
$
893,847
$
902,671
Business held-for-sale(1)
—
—
5,439
4,152
Revenue from recurring operations
$
311,415
$
316,181
$
888,408
$
898,519
Gross margin - GAAP
$
208,288
$
214,556
$
587,677
$
591,460
Gross margin percentage - GAAP
66.9
%
67.9
%
65.7
%
65.5
%
Identified adjustments:
Costs recognized upon sale of acquired inventory
$
—
$
181
$
—
$
554
Amortization of intangibles
9,465
11,057
28,377
33,467
Stock-based compensation, inclusive of employer taxes
400
378
1,252
1,010
Restructuring and restructuring-related costs
1,152
364
4,756
7,953
Impact of business held-for-sale(1)
—
—
(2,581)
(147)
Adjusted gross margin
$
219,305
$
226,536
$
619,481
$
634,297
Adjusted gross margin percentage(2)
70.4
%
71.6
%
69.7
%
70.6
%
(1)March 31, 2025 amounts relate to the Protein Sciences segment business that met the held-for-sale criteria on December 31, 2023. March 31, 2026 amounts relate to the Diagnostics and Spatial Biology segment business that met the held-for-sale criteria on June 30, 2025.
(2)Adjusted gross margin percentage excludes both revenue and gross margin for the businesses that met the held-for-sale criteria during the respective periods.
Selling, General and Administrative Expenses
T3Selling, general and administrative expenses decreased 28% to $109.3 million and decreased 13% to $339.2 million for the quarter and nine months ended March 31, 2026, respectively, from the same prior year periods. The decrease in expense for the quarter and nine months ended March 31, 2026 was primarily due to non-recurring arbitration award in the prior year and ongoing cost management initiatives.
Research and Development Expenses
Research and development expenses decreased 5% to $23.5 million and decreased 4% to $70.8 million for the quarter and nine months ended March 31, 2026, respectively, from the same prior year periods. We continue to make strategic growth investments in research and development as we also employ our cost management initiatives.
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Segment Results
Protein Sciences
Quarter Ended
Nine Months Ended
March 31,
March 31,
2026
2025
2026
2025
Net sales (in thousands)
$
226,154
$
227,687
$
643,426
$
643,774
Operating margin percentage
44.2
%
45.6
%
40.8
%
42.2
%
Protein Sciences’ net sales for the quarter and nine months ended March 31, 2026 were $226.2 million and $643.4 million, respectively, with results decreasing 1% and remaining flat, respectively, compared to the same respective prior year periods. As of December 31, 2023, a business within the Protein Sciences Segment met the criteria as held-for-sale; this held-for-sale business has been excluded from the segment’s fiscal 2026 and 2025 operating results. T4Organic revenue for the segment decreased 4% in the quarter ended March 31, 2026. Foreign currency exchange had a favorable impact of 3%. Organic revenue for the segment decreased 2% for the nine months ended March 31, 2026. Foreign currency exchange had a favorable impact of 2%.
The operating margin was 44.2% and 40.8% for the quarter and nine months ended March 31, 2026, respectively, compared to 45.6% and 42.2% in both comparative prior year periods. The segment’s operating margin decreased primarily due to unfavorable volume and product mix, partially offset by ongoing profitability initiatives.
Diagnostics and Spatial Biology
Quarter Ended
Nine Months Ended
March 31,
March 31,
2026
2025
2026
2025
Net sales (in thousands)
$
85,586
$
89,231
$
246,224
$
256,558
Operating margin percentage
12.1
%
9.4
%
11.2
%
6.2
%
Diagnostics and Spatial Biology’s net sales for the quarter and nine months ended March 31, 2026 were $85.6 million and $246.2 million, respectively, with decreased net sales of 4% and 4% compared to the same respective prior year periods. T5Organic growth for the segment for the quarter ended March 31, 2026 was 3% from the prior year, with foreign currency exchange having a favorable impact of 1%. The held-for-sale business had an unfavorable impact of 8%. Organic growth for the nine months ended March 31, 2026 was 3% compared to the prior year, with foreign currency exchange having a favorable impact of 1%. The held-for-sale business had an unfavorable impact of 8%.
The operating margin for the segment was 12.1% and 11.2% for the quarter and nine months ended March 31, 2026, respectively, compared to 9.4% and 6.2% in both comparative prior year periods. The segment’s operating margin was favorably impacted by the Exosome Diagnostics divestiture and ongoing profitability initiatives, partially offset by unfavorable product mix.
Income Taxes
Income taxes were at an effective rate of 28.3% and 25.2% of consolidated earnings for the quarter and nine months ended March 31, 2026, respectively, compared to 41.0% and 24.9% for the same respective prior year periods. The change in the Company’s tax rate for the quarter and nine months ended March 31, 2026 was driven by the mix of net income and the impact of disrete tax expenses.
The forecasted tax rate as of the third fiscal quarter of 2026 before discrete items is 26.9% compared to the prior year forecasted tax rate before discrete items of 23.1%. Excluding the impact of discrete items, the Company expects the consolidated income tax rate for the remainder of fiscal 2026 to range from 25% to 29%.
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Net Earnings
Non-GAAP adjusted consolidated net earnings are as follows (in thousands):
Quarter Ended
Nine Months Ended
March 31,
March 31,
2026
2025
2026
2025
Net earnings before taxes - GAAP
$
71,225
$
38,274
$
170,000
$
121,322
Identified adjustments:
Amortization of intangibles
15,382
18,836
46,111
57,136
Amortization of Wilson Wolf intangible assets
2,490
2,491
7,469
7,471
Acquisition related expenses and other
1,042
5,290
6,789
9,477
Certain litigation charges
822
38,927
5,370
40,606
Stock-based compensation, inclusive of employer taxes
10,968
11,629
37,262
37,504
Restructuring and restructuring-related costs
2,952
716
14,201
15,027
Investment (gain) loss and other non-operating (income) loss
1,618
—
1,314
—
Recovery of assets held-for-sale
—
(3,655)
(6,789)
(3,655)
Impact of business held-for-sale(1)
—
—
2,573
479
Net earnings before taxes - Adjusted
$
106,499
$
112,508
$
284,300
$
285,367
Non-GAAP tax rate
22.3
%
21.5
%
22.3
%
21.5
%
Non-GAAP tax expense
$
23,749
$
24,190
$
63,399
$
61,385
Non-GAAP adjusted net earnings
$
82,750
$
88,318
$
220,901
$
223,982
Earnings per share - diluted - Adjusted
$
0.53
$
0.56
$
1.41
$
1.39
(1)March 31, 2025 amounts relate to the Protein Sciences segment business that met the held-for-sale criteria on December 31, 2023. March 31, 2026 amounts relate to the Diagnostics and Spatial Biology segment business that met the held-for-sale criteria on June 30, 2025.
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 quarter and nine months ended March 31, 2026 and 2025.
Quarter Ended
Nine Months Ended
March 31,
March 31,
2026
2025
2026
2025
GAAP effective tax rate
28.3
%
41.0
%
25.2
%
24.9
%
Discrete items
(0.5)
(19.5)
1.7
(1.8)
Annual forecast update
(0.9)
1.6
—
—
Long-term GAAP tax rate
26.9
%
23.1
%
26.9
%
23.1
%
Rate impact items
Stock based compensation
(2.9)
%
(1.0)
%
(2.9)
%
(3.8)
%
Other
(1.7)
(0.6)
(1.7)
2.2
Total rate impact items
(4.6)
%
(1.6)
%
(4.6)
%
(1.6)
%
Non-GAAP adjusted tax rate
22.3
%
21.5
%
22.3
%
21.5
%
The difference between the reported GAAP tax rate and non-GAAP tax rate applied to the identified non-GAAP adjustments for the quarter ended March 31, 2026 is primarily a result of discrete tax items, including the tax expense of stock option exercises.
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LIQUIDITY AND CAPITAL RESOURCES
T6Cash and cash equivalents and available-for-sale investments were $214.1 million as of March 31, 2026, compared to $162.2 million as of June 30, 2025.
The Company has a line-of-credit governed by a Credit Agreement dated August 31, 2022 that will mature on August 31, 2027. As of March 31, 2026, there is $800 million available on the line-of-credit. See Note 5 to the Condensed Consolidated Financial Statements for a description of the Credit Agreement.
During fiscal 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 2023, Wilson Wolf met the EBITDA target and 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, which requires the Company to acquire the remaining 80.1% of Wilson Wolf on December 31, 2027. The second part of the contract would be accelerated in advance of December 31, 2027 if Wilson Wolf meets certain financial milestones.
As of March 31, 2026, the second milestones have not been met. T7The second option payment of approximately $1 billion plus potential contingent consideration is forecasted to occur between fiscal 2026 and fiscal 2028.
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 cash, cash generated from operations, and remaining credit available on its existing revolving line of credit.
Cash Flows From Operating Activities
The Company generated cash of $196.7 million from operating activities in the nine months ended March 31, 2026 compared to $189.4 million in the nine months ended March 31, 2025. The increase from the prior year was primarily due to increased net earnings for the year.
Cash Flows From Investing Activities
We continue to make investments in our business, including capital expenditures.
Capital expenditures for fixed assets for the nine months ended March 31, 2026 and 2025 were $20.4 million and $26.1 million, respectively. Capital expenditures for the remainder of fiscal 2026 are expected to be approximately $7 million. Capital expenditures are expected to be financed through currently available funds and cash generated from operating activities. Expected additions in fiscal 2026 are related to increasing capacity to meet expected sales growth across the Company.
During the nine months ended March 31, 2025, the Company invested $15.0 million into Spear Bio. There was no comparable activity in fiscal 2026.
During the nine months ended March 31, 2025, certificates of deposit reached maturity for $1.1 million. There was no comparable activity in fiscal 2026.
The Company received tax distributions of $4.6 million and $2.7 million from its equity method investee during the nine months ended March 31, 2026 and 2025.
During the nine months ended March 31, 2026, the Company received $4.6 million for assets held-for-sale. During the nine months ended March 31, 2025, the Company received $1.8 million for the sale of assets held-for-sale.
Cash Flows From Financing Activities
During the nine months ended March 31, 2026 and 2025, the Company paid cash dividends of $37.4 million and $38.0 million, respectively, to all common shareholders. On May 6, 2026, the Company announced the payment of an $0.08 per share cash dividend, or approximately $12.5 million, will be payable May 29, 2026, to all common shareholders of record on May 18, 2026.
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Cash of $58.2 million and $45.5 million was received during the nine months ended March 31, 2026 and 2025, respectively, from the exercise of stock options.
During the nine months ended March 31, 2026 and 2025, the Company made repayments of $146.0 million and $27.0 million, respectively, on its long-term debt balance. The Company drew $38.0 million under its revolving line-of-credit facility during the nine months ended March 31, 2025. There was no comparable activity in fiscal 2026.
T8There were $175.7 million of share repurchases during the nine months ended March 31, 2025. There was no comparable activity in fiscal 2026.
During the nine months ended March 31, 2026 and 2025, the Company paid taxes of $10.6 million and $6.3 million related to restricted stock units and stock options exercised through net share settlements classified as financing activities.
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CRITICAL ACCOUNTING POLICIES
The Company's significant accounting policies are discussed in the Company's Annual Report on Form 10-K for fiscal 2025 and are incorporated herein by reference. The application of certain of these policies requires judgments and estimates that can affect the results of operations and financial position of the Company. Judgments and estimates are used for, but not limited to, valuation of available-for-sale investments, inventory valuation and allowances, valuation of intangible assets and goodwill and valuation of investments in unconsolidated entities. There have been no significant changes in estimates in the quarter or nine months ended March 31, 2026 that would require disclosure nor have there been any changes to the Company's policies.
NON-GAAP FINANCIAL MEASURES
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 2, 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 revenue
●Adjusted gross margin
●Adjusted operating margin
●Adjusted net earnings and diluted earnings per share
●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 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 revenue represents revenue growth excluding revenue from acquisitions within the preceding 12 months, the impact of foreign currency, the impact of businesses held-for-sale, 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. Revenues from businesses held-for-sale are excluded from our organic revenue calculation starting on the date they become held-for-sale as those revenues will not be comparative in future periods.
Revenues 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. There was no revenue from partially-owned consolidated subsidiaries in fiscal 2026 or 2025.
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, which is inclusive of the employer portion of payroll taxes on those stock awards, the costs recognized upon the sale of acquired inventory, amortization of acquisition intangibles, restructuring and restructuring-related costs. 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 other non-recurring items including gains or losses on 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.
Costs related to restructuring and restructuring-related activities, including reducing overhead and consolidating facilities, are excluded because we believe they are not indicative of our normal operating costs. 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 as well as revenue and expense attributable to businesses held-for-sale in the calculation of our non-GAAP financial measures.
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The Company’s non-GAAP adjusted operating margin and adjusted net earnings, in total and on a per share basis, also excludes acquisition related expenses inclusive of the changes in fair value of contingent consideration, and other non-recurring items including certain costs related to the transition to a new CEO, goodwill and long-lived asset impairments, and gains. We also exclude certain litigation charges which are facts and circumstances specific including costs to resolve litigation and legal settlement (gains and losses). In some cases, these costs may be a result of litigation matters at acquired companies that were not probable, inestimable, or unresolved at the time of acquisition.
The Company’s non-GAAP adjusted net earnings, in total and on a per share basis, also excludes 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. 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 Condensed Consolidated Financial Statements.
FORWARD LOOKING INFORMATION AND CAUTIONARY STATEMENTS
This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those regarding the Company's expectations as to the effect of changes to accounting policies, the amount of capital expenditures for the remainder of the fiscal year, the source of funding for capital expenditure requirements, the sufficiency of currently available funds for meeting the Company's needs, the impact of fluctuations in foreign currency exchange rates, and expectations regarding gross margin fluctuations, increasing research and development expenses, increasing selling, general and administrative expenses and income tax rates. These statements involve risks and uncertainties that may affect the actual results of operations.
The following important factors, among others, have affected and, in the future, could affect the Company's actual results: integration of newly acquired businesses, the introduction and acceptance of new products, general national and international economic, political, regulatory, and other conditions, increased competition, the reliance on internal manufacturing and related operations, supply chain challenges, the impact of currency exchange rate fluctuations, the recruitment and retention of qualified personnel, the impact of governmental regulation, maintenance of intellectual property rights, credit risk and fluctuation in the market value of the Company's investment portfolio, and unseen delays and expenses related to facility construction and improvements. For additional information concerning such factors, see the Company's Annual Report on Form 10-K for fiscal 2025 as filed with the Securities and Exchange Commission and Part II. Item 1A below.
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Mentions · how they’re counted
| Category | Underlined | Word counter | Model’s count |
|---|---|---|---|
| AI AI, artificial intelligence, generative AI, machine learning, large language model, LLM | 0 | 0 | 0 |
| Layoffs layoffs, RIF, headcount reduction, workforce optimization, restructuring | 12 | — | 0 |
| Recession recession, downturn, contraction, slowdown | 0 | 0 | 0 |
| Tariffs tariff, trade war, trade barriers, trade restrictions, trade policy | 0 | 0 | 0 |
| Buybacks share repurchase, buyback program | 1 | — | 1 |
Underlines use the same word lists the scores use. AI, recession and tariffs follow Palanor’s word counter, so those counts match it exactly on the same text. Layoffs and buybacks use the terms the model was given. The model’s count is an estimate by meaning, not by string, so it can differ from the underlines.
Source: SEC EDGAR · public domain · Highlights by Palanor