10-Q 1 tmb-20221231x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022, or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to

Commission file number 0-17272

BIO-TECHNE CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota

41-1427402

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

614 McKinley Place N.E.

Minneapolis, MN 55413

(612) 379-8854

(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

TECH

The NASDAQ Stock Market LLC

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 (§232.405 of this chapter) 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 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.

Large accelerated filer

Accelerated filer

 

 

 

 

Non-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 Exchange Act Rule 12b- 2).      Yes    ☒  No

At February 1, 2023, 157,275,200 shares of the Company's Common Stock (par value $0.01) were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

AND COMPREHENSIVE INCOME

Bio-Techne Corporation and Subsidiaries

(in thousands, except per share data)

(unaudited)

    

Quarter Ended

Six Months Ended

December 31, 

December 31, 

2022

2021

2022

2021

Net sales

$

271,581

$

269,276

$

541,236

$

526,995

Cost of sales

 

88,221

 

85,585

 

178,280

 

172,307

Gross margin

 

183,360

 

183,691

 

362,956

 

354,688

Operating expenses:

 

 

  

Selling, general and administrative

 

93,010

 

100,693

 

192,386

 

186,868

Research and development

 

22,459

 

20,650

 

46,362

 

42,250

Total operating expenses

 

115,469

 

121,343

 

238,748

 

229,118

Operating income

 

67,891

 

62,348

 

124,208

 

125,570

Other income (expense)

 

(1,462)

23,831

 

45,938

 

27,992

Earnings before income taxes

 

66,429

 

86,179

 

170,146

 

153,562

Income taxes (benefit)

 

16,424

 

14,120

 

30,407

 

12,522

Net earnings, including noncontrolling interest

 

50,005

 

72,059

 

139,739

 

141,040

Net earnings (loss) attributable to noncontrolling interest

 

 

(8,114)

 

179

 

(8,748)

Net earnings attributable to Bio-Techne

$

50,005

$

80,173

$

139,560

$

149,788

Other comprehensive income (loss):

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

17,370

 

1,924

 

(4,087)

 

(6,722)

Foreign currency translation reclassified to earnings with Eminence deconsolidation

119

Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8

 

(685)

 

2,884

 

4,010

 

4,566

Other comprehensive income (loss)

 

16,685

 

4,808

 

42

 

(2,156)

Other comprehensive income (loss) attributable to noncontrolling interest

 

 

66

 

(33)

 

27

Other comprehensive income (loss) attributable to Bio-Techne

 

16,685

 

4,742

 

75

 

(2,183)

Comprehensive income attributable to Bio-Techne

$

66,690

$

84,915

$

139,635

$

147,605

Earnings per share attributable to Bio-Techne(1):

 

Basic

$

0.32

$

0.51

$

0.89

$

0.95

Diluted

$

0.31

$

0.49

$

0.86

$

0.91

Weighted average common shares outstanding(1):

 

 

  

 

  

 

  

Basic

 

157,011

 

157,240

 

156,887

 

156,808

Diluted

 

161,750

 

164,828

 

161,766

 

164,636

(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 Condensed Consolidated Financial Statements.

1

CONDENSED CONSOLIDATED BALANCE SHEETS

Bio-Techne Corporation and Subsidiaries

(in thousands, except share and per share data)

    

December 31, 

2022

June 30, 

(unaudited)

2022

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

164,682

$

172,567

Short-term available-for-sale investments

 

32,074

 

74,462

Accounts receivable, less allowance for doubtful accounts of $3,250 and $2,568, respectively

 

184,763

 

194,548

Inventories

 

160,233

 

141,123

Other current assets

 

23,431

 

22,856

Total current assets

 

565,183

 

605,556

Property and equipment, net

 

223,851

 

223,242

Right of use asset

 

83,937

 

65,556

Goodwill

 

869,589

 

822,101

Intangible assets, net

 

567,647

 

531,522

Other assets

 

53,194

 

46,828

Total assets

$

2,363,401

$

2,294,805

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Trade accounts payable

$

24,100

$

33,865

Salaries, wages and related accruals

 

28,633

 

61,953

Accrued expenses

 

16,279

 

17,886

Contract liabilities

 

21,812

 

23,406

Income taxes payable

 

25,277

 

13,237

Operating lease liabilities - current

 

10,975

 

11,928

Current portion of long-term debt obligations

 

 

12,500

Other current liabilities

 

1,319

 

1,243

Total current liabilities

 

128,395

 

176,018

Deferred income taxes

 

111,381

 

98,994

Long-term debt obligations

 

200,000

 

243,410

Long-term contingent consideration payable

 

7,000

 

5,000

Operating lease liabilities

 

78,183

 

58,133

Other long-term liabilities

 

11,336

 

12,239

 

  

 

  

Bio-Techne’s Shareholders’ equity:

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 157,093,879 and 156,644,212, respectively(1)

 

1,571

 

1,566

Additional paid-in capital(1)

 

700,684

 

652,467

Retained earnings(1)

 

1,199,976

 

1,122,937

Accumulated other comprehensive loss

 

(75,125)

 

(75,200)

Total Bio-Techne’s shareholders’ equity

 

1,827,106

 

1,701,770

Noncontrolling interest

 

 

(759)

Total shareholders’ equity

 

1,827,106

 

1,701,011

Total liabilities and shareholders’ equity

$

2,363,401

$

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 Condensed Consolidated Financial Statements.

2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries

(in thousands)

(unaudited)

    

Six Months Ended

December 31, 

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

  

 

  

Net earnings, including noncontrolling interest

$

139,739

$

141,040

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

  

 

  

Depreciation and amortization

 

53,344

 

49,836

Costs recognized on sale of acquired inventory

 

400

 

1,596

Deferred income taxes

 

(6,365)

 

7,233

Stock-based compensation expense

 

31,205

 

25,706

Fair value adjustment to contingent consideration payable

 

(8,600)

 

(16,400)

Contingent consideration payments - operating

 

 

(3,300)

(Gain) Loss on investment, net

 

(37,176)

 

Fair value adjustment on available for sale investments

 

(839)

 

(33,672)

Asset impairment restructuring

546

Eminence impairment

18,715

Gain on sale of Eminence

(11,682)

Leases, net

 

640

 

(501)

Other operating activity

 

112

 

383

Change in operating assets and operating liabilities, net of acquisition:

 

  

 

  

Trade accounts and other receivables, net

 

11,425

 

(9,347)

Inventories

 

(18,362)

 

(8,700)

Prepaid expenses

 

(2,005)

 

(7,025)

Trade accounts payable, accrued expenses, contract liabilities, and other

 

(11,541)

 

(175)

Salaries, wages and related accruals

 

(33,265)

 

(10,408)

Income taxes payable

 

13,435

 

(6,100)

Net cash provided by (used in) operating activities

 

120,465

 

149,427

CASH FLOWS FROM INVESTING ACTIVITIES:

 

  

 

  

Proceeds from maturities of available-for-sale investments

 

26,509

 

12,450

Purchases of available-for-sale investments

 

(20,500)

 

(13,500)

Proceeds from sale of CCXI investment

73,219

Additions to property and equipment

 

(15,665)

 

(16,238)

Acquisitions, net of cash acquired

 

(101,184)

 

Proceeds from sale of Eminence

 

17,824

 

Investment of forward purchase contract

(25,000)

Net cash provided by (used in) investing activities

 

(19,797)

 

(42,288)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

  

 

  

Cash dividends

 

(25,106)

 

(25,069)

Proceeds from stock option exercises

 

16,977

 

56,500

Re-purchases of common stock

 

(19,562)

 

(41,294)

Borrowings under line-of-credit agreement

 

449,661

 

50,000

Repayments of long-term debt

 

(505,661)

 

(109,250)

Contingent consideration payments - financing

 

 

(700)

Taxes paid on RSUs and net share settlements

(17,853)

(23,247)

Other financing activity

 

(2,457)

 

Net cash provided by (used in) financing activities

 

(104,001)

 

(93,060)

Effect of exchange rate changes on cash and cash equivalents

 

(4,552)

 

(1,325)

Net change in cash and cash equivalents

 

(7,885)

 

12,754

Cash and cash equivalents at beginning of period

 

172,567

 

199,091

Cash and cash equivalents at end of period

$

164,682

$

211,845

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

26,411

$

15,368

Cash paid for interest

$

5,619

$

6,144

See Notes to Condensed Consolidated Financial Statements.

3

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Bio-Techne Corporation and Subsidiaries

(unaudited)

Note 1. Basis of Presentation and Summary of Significant Accounting Policies:

The interim consolidated financial statements of Bio-Techne Corporation and subsidiaries, (the Company) presented here have been prepared by the Company and are unaudited. They have been prepared in accordance with accounting principles generally accepted in the United States of America and with instructions to Form 10-Q and Article 10 of Regulation S-X. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto for the fiscal year ended June 30, 2022, included in the Company's Annual Report on Form 10-K for fiscal 2022. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10-K for fiscal 2022. The Company follows these policies in preparation of the interim unaudited condensed consolidated financial statements.

During the quarter ended December 31, 2022, the Company operated under two operating segments, Protein Sciences and Diagnostics and Genomics. The operating segments the Company operated under were consistent with the Company's operating segments disclosed in the Company's Annual Report on Form 10-K for fiscal 2022.

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 was 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.

Partially-owned consolidated subsidiary: On September 1, 2022, the Company completed the sale of its equity shares of Changzhou Eminence Biotechnology Co., Ltd. (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 Condensed 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.

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 Corporation (Wilson Wolf) if certain annual revenue or 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 annual earnings before interest, taxes, depreciation, and amortization (EBITDA) at any point prior to December 31, 2027. Once triggered, the Company is required to make a payment of $231 million in exchange for a 19.9% ownership stake. If Wilson Wolf doesn’t achieve the revenue and EBITDA targets by December 31, 2027, the agreement will expire.

Once the first part of the forward contract is 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. The second

4

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 approximate multiple for total expected payments of the second forward contract is 4.4 times the annual revenue of Wilson Wolf. The Company has elected to apply the measurement alternative as detailed under ASC 321-10-35-2 for the Wilson Wolf investment. The Company recorded the $25 million payment as a cost basis investment within Other long-term 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.

Fiscal Year 2023 Restructuring Actions:

QT Holdings Corporation (Quad)

In August 2022, the Company informed employees of our decision to close our QT Holdings Corporation (Quad) facility as part of a realignment of activities within our Reagent Solutions division. The closure of the site is expected to be substantially completed in the third 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 six months ended December 31, 2022. There were no additional charges for the second fiscal quarter ended December 31, 2022. The related first quarter of fiscal 2023 restructuring charges were recorded in the income statement as follows (in thousands):

Employee

Asset

    

severance

    

Impairment and other

    

Total

Selling, general and administrative

$

1,328

$

842

$

2,170

Employee

Asset

    

severance

    

Impairment and other

    

Total

Expense incurred in the first quarter of 2023

$

1,328

$

842

$

2,170

Cash payments

(420)

(431)

(851)

Adjustments

(72)

(72)

Accrued restructuring actions balances as of September 30, 2022

908

339

1,247

Cash payments

(753)

(262)

(1,015)

Adjustments

(38)

(73)

(111)

Accrued restructuring actions balances as of December 31, 2022

$

117

$

4

$

121

5

Protein Sciences realignment

In December 2022, the Company informed employees it would undertake certain actions to strategically reallocate resources to high growth areas of the business. The realignment impacted a limited number of employees and is expected to be complete in the third fiscal quarter of 2023. As a result, a pre-tax charge of $0.8 million related to employee severance was recorded in the Selling, general and administrative line of operating income within our Protein Sciences segment during the quarter ended December 31, 2022.

Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):

Employee

severance

Expense incurred in the second quarter of 2023

$

780

Cash payments

(176)

Adjustments

Accrued restructuring actions balances as of December 31, 2022

$

604

Fiscal Year 2022 Restructuring Actions:

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 completed 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):

Employee

Asset

    

severance

    

Impairment and other

    

Total

Selling, general and administrative

$

649

$

750

$

1,399

Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):

Employee

Asset

    

severance

    

Impairment and other

    

Total

Expense incurred in the first quarter of 2022

$

639

$

546

$

1,185

Incremental expense incurred during fiscal 2022

242

242

Cash payments

(589)

(554)

(1,143)

Adjustments(1)

(50)

(234)

(284)

Accrued restructuring actions balances as of June 30, 2022

$

$

$

(1)Adjustments include refinements to our estimated close down costs as well as the impacts from foreign currency exchange.

Recently Adopted Accounting Pronouncements

There were no accounting pronouncements adopted in the quarter ended December 31, 2022. Refer to the Form 10-K for accounting pronouncements adopted prior to June 30, 2022.

6

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 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 $0.8 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 December 31, 2022.

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 December 31, 2022 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 December 31, 2022 and June 30, 2022 were approximately $23.5 million and $25.5 million, respectively. Contract liabilities as of June 30, 2022 subsequently recognized as revenue during the quarter and six month period ended December 31, 2022 were approximately $5.3 million and $15.9 million, respectively. Contract liabilities in excess of one year are included in Other long-term liabilities on the consolidated balance sheet.

7

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 (in thousands):

    

Quarter Ended

Six Months Ended

December 31, 

December 31, 

    

2022

    

2021

2022

    

2021

Consumables

$

217,330

$

212,706

$

433,760

$

418,397

Instruments

 

32,301

 

33,353

 

58,759

 

63,222

Services

 

15,852

 

17,354

 

37,297

 

33,611

Total product and services revenue, net

$

265,483

$

263,413

$

529,816

$

515,230

Royalty revenues

 

6,098

 

5,863

 

11,420

 

11,765

Total revenues, net

$

271,581

$

269,276

$

541,236

$

526,995

Revenue by geography is as follows (in thousands):

    

Quarter Ended

Six Months Ended

December 31, 

December 31, 

    

2022

    

2021

2022

    

2021

 

  

 

  

  

 

  

United States

$

149,005

$

142,367

$

304,436

$

283,069

EMEA, excluding United Kingdom

 

54,523

 

57,159

 

100,544

 

108,702

United Kingdom

 

10,872

 

11,842

 

22,574

 

24,320

APAC, excluding Greater China

 

17,968

 

19,603

 

35,433

 

37,104

Greater China

 

30,326

 

31,009

 

61,847

 

59,442

Rest of World

 

8,887

 

7,296

 

16,402

 

14,358

Net Sales

$

271,581

$

269,276

$

541,236

$

526,995

8

Note 3. Selected Balance Sheet Data:

Inventories:

Inventories consist of (in thousands):

    

December 31, 

June 30, 

    

2022

    

2022

Raw materials

$

84,757

$

79,291

Finished goods(1)

 

80,548

 

66,943

Inventories, net

$

165,305

$

146,234

(1) Finished goods inventory of $5,072 and $5,111 included within other long-term assets in the respective December 31, 2022 and June 30, 2022, consolidated balance sheet. The inventory is included in long-term assets as it is forecasted to be sold after the 12 months subsequent to the consolidated balance sheet date.

Property and Equipment:

Property and equipment consist of (in thousands):

    

December 31, 

June 30, 

    

2022

    

2022

Land

$

9,079

$

8,572

Buildings and improvements

 

242,340

 

229,551

Machinery and equipment

182,306

174,813

Construction in progress

 

13,469

 

21,729

Property and equipment, cost

 

447,194

 

434,665

Accumulated depreciation and amortization

 

(223,343)

 

(211,423)

Property and equipment, net

$

223,851

$

223,242

Intangible Assets:

Intangible assets consist of (in thousands):

December 31, 

June 30, 

2022

2022

Developed technology

$

615,301

$

542,038

Trade names

 

146,618

 

146,457

Customer relationships

 

224,212

 

225,882

Patents

 

3,514

 

3,313

Other intangibles

 

6,894

 

6,306

Definite-lived intangible assets

 

996,539

 

923,996

Accumulated amortization

 

(451,592)

 

(415,174)

Definite-lived intangibles assets, net

 

544,947

 

508,822

In process research and development

 

22,700

 

22,700

Total intangible assets, net

$

567,647

$

531,522

9

Changes to the carrying amount of net intangible assets for the period ended December 31, 2022 consist of (in thousands):

Beginning balance

$

531,522

Acquisitions

 

75,600

Other additions

 

713

Amortization expense

 

(38,861)

Currency translation

(1,327)

Ending balance

$

567,647

The estimated future amortization expense for intangible assets as of December 31, 2022 is as follows (in thousands):

Remainder 2023

    

$

38,462

2024

 

74,764

2025

 

71,341

2026

 

67,478

2027

 

57,326

Thereafter

 

235,576

Total

$

544,947

Goodwill:

Changes to the carrying amount of goodwill for the period ended December 31, 2022 consist of (in thousands):

    

    

Diagnostics and

    

Protein Sciences

 Genomics

Total

June 30, 2022

$

376,493

$

445,608

$

822,101

Acquisitions

 

51,051

-

51,051

Currency translation

 

(3,623)

60

(3,563)

December 31, 2022

$

423,921

$

445,668

$

869,589

We evaluate the carrying value of goodwill in the fourth quarter of each fiscal year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. The Company performed a quantitative goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2022. No indicators of impairment were identified as part of our assessment.

10

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 consideration related to Namocell, Inc is considered preliminary with provisional amounts primarily related to goodwill, intangible assets, working capital, certain tax-related, and contingent liability amounts. The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations for the quarter ended December 31, 2022 were approximately $2.2 million and $1.6 million, respectively. Net sales and operating loss of this business included in Bio-Techne's consolidated results of operations for the six months ended December 31, 2022 were approximately $4.6 million and $3.1 million, respectively.

The preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date and as of December 31, 2022 are as follows (in thousands):

 

Preliminary allocation at acquisition date and at December 31, 2022

Current assets, net of cash

$

3,248

Equipment and other long-term assets

 

405

Intangible assets:

Developed technologies

 

73,900

Tradenames

 

700

Customer relationships

 

900

Non-competition agreement

 

100

Goodwill

 

51,051

Total assets acquired

 

130,304

Liabilities

 

546

Deferred income taxes, net

 

17,974

Net assets acquired

$

111,784

Cash paid, net of cash acquired

 

101,184

Contingent consideration payable

 

10,600

Net assets acquired

$

111,784

 

11

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 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 Condensed 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 Condensed 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 Condensed 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.

Note 5. Fair Value Measurements:

The Company’s financial instruments include cash and cash equivalents, available for sale investments, derivative instruments, accounts receivable, accounts payable, contingent consideration obligations, 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.

12

The following tables provide information by level for financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

    

Total 

    

carrying 

value as of

Fair Value Measurements Using 

December 31, 

Inputs Considered as

2022

Level 1

Level 2

Level 3

 

Assets

 

  

 

  

 

  

 

  

Exchange traded securities(1)

$

23,574

$

23,574

$

$

Certificates of deposit(2)

 

8,500

 

8,500

 

 

Derivative instruments - cash flow hedges(3)

 

15,791

 

 

15,791

 

Total assets

$

47,865

$

32,074

$

15,791

$

Liabilities

 

  

 

  

 

  

 

  

Contingent consideration

$

7,000

$

$

$

7,000

Total liabilities

$

7,000

$

$

$

7,000

    

Total

    

 carrying