BIO-TECHNE Corp [TECH] Filings

10-Q 1 tech-20240930x10q.htm 10-Q

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 September 30, 2024, 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 October 31, 2024, 158,891,800 shares of the Company's Common Stock (par value $0.01) were outstanding.

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TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	30

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

	SIGNATURES	35

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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
	September 30,
	2024		2023

Net sales	$	289,458	$	276,935
Cost of sales		106,441		91,744
Gross margin		183,017		185,191

Operating expenses:
Selling, general and administrative		119,161		105,331
Research and development		23,869		23,998
Total operating expenses		143,030		129,329
Operating income		39,987		55,862

Other income (expense)		184		(6,304)
Earnings before income taxes		40,171		49,558
Income taxes		6,571		(1,435)
Net earnings	$	33,600	$	50,993
Other comprehensive income (loss):
Foreign currency translation income (loss)		21,256		(11,602)
Unrealized gains (losses) on derivative instruments - cash flow hedges, net of tax amounts disclosed in Note 8		(3,027)		(350)
Other comprehensive income (loss)		18,229		(11,952)
Comprehensive income	$	51,829	$	39,041

Earnings per share:
Basic	$	0.21	$	0.32
Diluted	$	0.21	$	0.31

Weighted average common shares outstanding:
Basic		158,531		158,130
Diluted		161,115		161,940

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED BALANCE SHEETS

Bio-Techne Corporation and Subsidiaries

(in thousands, except share and per share data)


	September 30,
	2024		June 30,
	(unaudited)		2024
ASSETS
Current assets:
Cash and cash equivalents	$	187,540	$	151,791
Short-term available-for-sale investments		—		1,072
Accounts receivable, less allowance for doubtful accounts of $4,904 and $4,386, respectively		223,688		241,394
Inventories		185,041		179,731
Current assets held-for-sale		9,459		9,773
Other current assets		42,839		33,658
Total current assets		648,567		617,419

Property and equipment, net		253,939		251,154
Right-of-use assets		89,221		91,285
Goodwill		982,585		972,663
Intangible assets, net		486,004		507,081
Other assets		275,701		264,265
Total assets	$	2,736,017	$	2,703,867
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	31,559	$	37,968
Salaries, wages and related accruals		41,977		49,818
Accrued expenses		21,088		24,886
Contract liabilities		26,614		27,930
Income taxes payable		3,136		3,706
Operating lease liabilities - current		13,485		12,920
Other current liabilities		4,269		2,151
Total current liabilities		142,128		159,379

Deferred income taxes		50,017		55,863
Long-term debt obligations		300,000		319,000
Operating lease liabilities		85,433		87,618
Other long-term liabilities		19,789		13,157

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 158,878,127 and 158,216,258 respectively		1,589		1,582
Additional paid-in capital		855,973		820,337
Retained earnings		1,341,175		1,325,247
Accumulated other comprehensive loss		(60,087)		(78,316)
Total Bio-Techne’s shareholders’ equity		2,138,650		2,068,850
Total liabilities and shareholders’ equity	$	2,736,017	$	2,703,867

See Notes to Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Bio-Techne Corporation and Subsidiaries

(in thousands)

(unaudited)


	Quarter Ended
	September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	33,600	$	50,993
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		28,137		28,540
Costs recognized on sale of acquired inventory		188		181
Deferred income taxes		(5,340)		(11,591)
Stock-based compensation expense		10,184		10,093
Fair value adjustment to contingent consideration payable		—		(1,750)
Fair value adjustment on available-for-sale investments		—		(283)
(Gain) Loss on equity method investment		(374)		2,382
Asset impairment restructuring		6,039		—
Leases, net		445		613
Other operating activity		747		182
Change in operating assets and operating liabilities, net of acquisition:
Trade accounts and other receivables, net		21,563		15,599
Inventories		(2,805)		(5,216)
Prepaid expenses		(3,158)		(2,572)
Trade accounts payable, accrued expenses, contract liabilities, and other		(10,911)		(2,695)
Salaries, wages and related accruals		(8,246)		(2,157)
Income taxes payable		(6,180)		(22,936)
Net cash provided by (used in) operating activities		63,889		59,383

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of available-for-sale investments		1,085		23,759
Additions to property and equipment		(9,172)		(13,592)
Acquisitions, net of cash acquired		—		(166,426)
Distributions from (Investments in) Wilson Wolf		1,403		2,149
Investment in Spear Bio		(15,000)		—
Net cash provided by (used in) investing activities		(21,684)		(154,110)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends		(12,688)		(12,654)
Proceeds from stock option exercises		25,101		14,394
Borrowings under line-of-credit agreement		—		160,000
Repayments of long-term debt		(19,000)		(70,000)
Taxes paid on RSUs and net share settlements		(4,984)		(20,228)
Net cash provided by (used in) financing activities		(11,571)		71,512

Effect of exchange rate changes on cash and cash equivalents		5,115		(8,693)
Net change in cash and cash equivalents		35,749		(31,908)
Cash and cash equivalents at beginning of period		151,791		180,571
Cash and cash equivalents at end of period	$	187,540	$	148,663

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	16,490	$	32,797
Cash paid for interest	$	5,205	$	4,506

See Notes to Condensed Consolidated Financial Statements.

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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, 2024, included in the Company's Annual Report on Form 10-K for fiscal 2024. A summary of significant accounting policies followed by the Company is detailed in the Company's Annual Report on Form 10-K for fiscal 2024. The Company follows these policies in preparation of the interim unaudited condensed consolidated financial statements.

During the quarter ended September 30, 2024, the Company operated under two operating segments, Protein Sciences and Diagnostics and Spatial Biology (formerly Diagnostics and Genomics). The name change is intended to better reflect the focus and scope of our offerings. The manner in which we operate our business and review discrete financial information did not change. Segment information presented herein reflects the updated name of the operating segment. 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 2024.

Investments: In July 2024, the Company paid $15 million to enter into an investment in Spear Bio. This investment is accounted for under the cost-method as we own less than 20% of the outstanding stock and we concluded that we do not have significant influence. Under the cost-method, the fair value is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. No such events or changes in circumstances were identified in the period ended September 30, 2024. The Company’s total investment of $15 million is included within Other assets on the Condensed Consolidated Balance Sheet.

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 annual earnings before interest, taxes, depreciation, and amortization (EBITDA) thresholds are met. Wilson Wolf is a leading manufacturer of cell culture devices, including the G-Rex product line. The first part of the forward contract is triggered upon Wilson Wolf achieving approximately $92 million in annual revenue or $55 million in EBITDA at any point prior to December 31, 2027. During the quarter ended March 31, 2023, the Company determined that Wilson Wolf had met the EBITDA target. On March 31, 2023, the Company paid an additional $232 million to acquire 19.9% of Wilson Wolf.

Since the first part of the forward contract has been triggered, the second part of the forward contract will automatically trigger, and requires the Company to acquire the remaining equity interest in Wilson Wolf on December 31, 2027 based on a revenue multiple of approximately 4.4 times trailing twelve month revenue. The second part of the contract would be accelerated in advance of December 31, 2027, if Wilson Wolf meets its second milestone of approximately $226 million in annual revenue or $136 million in annual EBITDA. If the second milestone is achieved, the forward contract requires the Company to pay approximately $1 billion plus potential consideration for revenue in excess of the revenue milestone.

The investment in Wilson Wolf is accounted for as an equity method investment under ASC 323. The Company initially records its equity method investments at the amount of the Company’s investment and adjusts each period for the Company’s share of the investee’s income or loss and dividends paid. Distributions from the equity method investee are accounted for using the cumulative earnings approach on the Consolidated Statement of Cash Flows. For the quarter ended September 30, 2024, there was $0.3 million of gain recorded on the Company’s Consolidated Statement of Earnings and Comprehensive Income related to the investment. The Company’s total investment of $241 million is included within Other assets on the Consolidated Balance Sheet.

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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. Other charges include consulting fees and expenses for changes to supporting IT systems that are enabling the Company to complete the restructuring activities.

Fiscal Year 2025 Restructuring Actions:

In the first quarter of fiscal 2025, the Company announced enterprise-wide restructuring focused on recovering operating margins and optimizing our manufacturing footprint. The Company is expecting to incur costs related to these actions through fiscal 2026, which will be recorded when specified criteria are met. The restructuring and restructuring-related charges for periods presented were recorded in the Consolidated Statements of Earnings as follows (in thousands):


	Quarter Ended
	September 30,
	2024
Cost of sales	$	4,898
Selling, general and administrative⁽¹⁾		5,371
Total	$	10,269

⁽¹⁾ Restructuring actions impacting research and development are not material to separately disclose and have been included within Selling, general and administrative costs.

Restructuring and restructuring-related costs by segment are as follows (in thousands):


	Three months ended September 30, 2024
		Employee		Asset-related
		severance		and other		Total
Protein Sciences	$	2,274	$	7,417	$	9,691
Diagnostics and Spatial Biology		444		—		444
Corporate		134		—		134
Total	$	2,852	$	7,417	$	10,269

The following table summarizes the changes in the Company’s accrued restructuring balance, which is included within Other current liabilities in the accompanying balance sheet. Other amounts reported as restructuring and restructuring-related costs in the accompanying statements of income have been summarized in the notes to the table (in thousands):


	Employee		Asset
	severance⁽¹⁾		impairment and other⁽²⁾		Total
Expense incurred in the first quarter of 2025	$	2,852	$	7,417	$	10,269
Cash payments		(189)		—		(189)
Non-cash adjustments		—		(7,417)		(7,417)
Accrued restructuring actions balance as of September 30, 2024	$	2,663	$	—	$	2,663

⁽¹⁾ Relates to impacted employees’ final paycheck, separation payments, outplacement services, legal fees, and retention packages related to the closure or relocation of certain manufacturing sites.

⁽²⁾ Primarily relates to impairment of intangibles and inventory as a result of the closure and relocation of certain manufacturing sites.

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Fiscal Year 2024 Restructuring Actions:

In the second quarter of fiscal 2024, the Company announced enterprise-wide restructuring focused on recovering operating margins, optimizing our distribution footprint, and enhancing our organization efficiency. These actions impacted approximately 4% of our global workforce. These actions continued through the first quarter of fiscal 2025 as we incurred charges relating to our business held-for-sale and consulting fees related to optimizing efficiency. The Company is expecting to incur costs related to these actions through the second quarter of fiscal 2025, which will be recorded when specified criteria are met.

As part of these actions, certain assets and liabilities associated with a disposal group in our Protein Sciences segment were classified as held-for-sale as of December 31, 2023, including $1.4 million of goodwill allocated to the disposal group on a relative fair value basis. As a result of impairment tests performed over the disposal group during fiscal 2024, a cumulative impairment charge of $22.0 million which includes the allocated goodwill, was recorded in the Selling, general and administrative line in the Consolidated Statements of Earnings for the year ended June 30, 2024. There were no impairment charges related to the disposal group during the first quarter of fiscal 2025. As of September 30, 2024, the assets remaining within the disposal group primarily include inventory and property and equipment of $9.5 million, which is net of expected selling costs. These assets are actively marketed, and we believe their sale will be completed within 12 months of the held-for-sale classification date. The held-for-sale assets are recorded in Current assets held-for-sale in our Consolidated Balance Sheet as of September 30, 2024 and June 30, 2024.

The restructuring and restructuring-related charges, including the impairment of assets held-for-sale, for periods presented were recorded in the Consolidated Statements of Earnings as follows (in thousands):


	Quarter Ended
	September 30,
		2024
Cost of sales	$	—
Selling, general and administrative⁽¹⁾		753
Total	$	753

⁽¹⁾Restructuring actions impacting research and development are not material to separately disclose and have been included within Selling, general and administrative costs.

Restructuring and restructuring-related costs by segment are as follows (in thousands):


	Three months ended September 30, 2024
		Employee		Asset-related
		severance		and other		Total
Protein Sciences	$	14	$	40	$	54
Diagnostics and Spatial Biology		—		—		—
Corporate		(3)		702		699
Total	$	11	$	742	$	753

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		Employee		Asset-related		Impairment of
		severance⁽¹⁾		and other⁽²⁾		assets held-for-sale		Total
Expense incurred in the second quarter of 2024		4,882		504		6,038		11,424
Incremental expense incurred in the third quarter of 2024		133		1,140		—		1,273
Incremental expense incurred in the fourth quarter of 2024		409		4,737		15,926		21,072
Cash payments		(4,882)		(2,800)		—		(7,682)
Non-cash adjustments		—		(3,391)		(21,963)		(25,354)
Adjustments⁽³⁾		219		—		—		219
Accrued restructuring actions balance as of June 30, 2024	$	761	$	190	$	—	$	952
Incremental expense incurred in the first quarter of 2025		—		753		—		753
Cash payments		(412)		(775)		—		(1,187)
Accrued restructuring actions balance as of September 30, 2024	$	349	$	169	$	—	$	518

⁽¹⁾ Relates to impacted employees’ final paycheck, separation payments, outplacement services, legal fees, and retention packages related to the closure or sale of certain distribution and manufacturing sites.

⁽²⁾ Primarily relates to impairment of right-of-use-assets, lease termination fees, consulting fees, and expenses for changes to supporting IT systems that are enabling the Company to complete the restructuring initiatives.

⁽³⁾ Relates to the refinement of the accrual recorded in the second quarter of fiscal 2024.

Protein Sciences realignment

In December 2022, the Company informed employees it would undertake certain actions to strategically reallocate operations resources to high growth areas of the business. Additional actions were taken in June 2023 primarily related to the sales organization. The actions impacted a limited number of employees and were completed in the fourth quarter of fiscal 2024. As a result of the realignment, a pre-tax charge of $1.7 million related to employee severance was recorded in the Selling, general and administrative line of operating income within our Protein Sciences segment during the year ended June 30, 2023. Adjustments in fiscal year 2024 relate to the refinement of employee severance payouts. Additional pre-tax charges for the year ended June 30, 2024 were $0.2 million. Restructuring actions, including cash and non-cash impacts, are as follows (in thousands):


	Employee
	severance
Accrued restructuring actions balance as of June 30, 2023	$	897
Fiscal year 2024 cash payments		(1,118)
First quarter fiscal year 2024 adjustments⁽¹⁾		89
Second quarter fiscal year 2024 adjustments⁽¹⁾		132
Accrued restructuring actions balance as of June 30, 2024	$	—

⁽¹⁾Fiscal year 2024 adjustments relate to the refinement of the accrual recorded in fiscal year 2023.

Legal Matters: The Company and its affiliates are involved in a number of legal actions from time to time involving product liability, employment, intellectual property and commercial disputes, shareholder related matters, environmental proceedings, tax disputes, and governmental proceedings and investigations. With respect to governmental proceedings and investigations, like other companies in our industry, the Company is subject to extensive regulation by national, state, and local governmental agencies in the United States and in other jurisdictions in which the Company and its affiliates operate. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries. The outcomes of legal actions are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages, as well as other remedies (including injunctions barring the sale of products that are the subject of the proceeding), that could require significant expenditures, result in lost revenues, or limit the Company's ability to conduct business in the applicable jurisdictions.

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The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages with incomplete scientific facts or legal discovery, involve unsubstantiated or indeterminate claims for damages, potentially involve penalties, fines or punitive damages, or could result in a change in business practice. The Company classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges in the consolidated statements of income.

In August 2024, 804,162 shares of outstanding vested stock options related to former employees expired which have now been excluded from the Company’s dilutive EPS calculation for the period ended September 30, 2024. The expiration date of these options is currently under dispute. The total net pre-tax value of these options on the expiration date was approximately $33 million. As of September 30, the matter is under review and the Company is unable to estimate any future exposure related to this matter at this time.

During the first quarter of fiscal 2025, the Company recognized $0.3 million of certain litigation charges. There was no comparable activity in the first quarter of fiscal 2024. As of each of the balance sheet dates presented, there was no accrued litigation. The ultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows. The Company includes accrued litigation in Other current liabilities and Other liabilities on the consolidated balance sheets. While it is not possible to predict the outcome for most of the legal matters discussed below, the Company believes it is possible that the costs associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.

Recently Adopted Accounting Pronouncements

There were no accounting pronouncements adopted in the quarter ended September 30, 2024. Refer to the Form 10-K for accounting pronouncements adopted prior to June 30, 2024.

Relevant New Standards Issued Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280), which requires incremental disclosures on reportable segments, primarily through enhanced disclosures on significant segment expenses. The Company will adopt this guidance beginning in the fourth quarter of fiscal year 2025 for our annual report and for interim periods starting in fiscal year 2026. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which requires incremental annual disclosures on income taxes, including rate reconciliations, income taxes paid, and other disclosures. The Company will adopt this guidance beginning in the fourth quarter of fiscal year 2026 for our annual report. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

Other than the items noted above, there have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant impact, on our unaudited Condensed Consolidated Financial Statements.

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.

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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 September 30, 2024.

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 September 30, 2024 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 September 30, 2024 and June 30, 2024 were approximately $29.2 million and $30.2 million, respectively. Contract liabilities as of June 30, 2024 subsequently recognized as revenue during the quarter ended September 30, 2024 were approximately $11.8 million. Contract liabilities as of June 30, 2023 subsequently recognized as revenue during the quarter ended September 30, 2023 were approximately $11.8 million. Contract liabilities in excess of one year are included in Other long-term liabilities on the consolidated balance sheet.

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
	September 30,
	2024		2023
Consumables	$	230,845	$	224,547
Instruments		26,206		24,860
Services		27,357		21,454
Total product and services revenue, net	$	284,408	$	270,861
Royalty revenues		5,050		6,074
Total revenues, net	$	289,458	$	276,935

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Revenue by geography is as follows (in thousands):


	Quarter Ended
	September 30,
	2024		2023

United States	$	165,015	$	159,105
EMEA, excluding United Kingdom		59,063		54,798
United Kingdom		13,944		12,449
APAC, excluding Greater China		18,122		17,351
Greater China		24,321		25,485
Rest of World		8,993		7,747
Net sales	$	289,458	$	276,935

Note 3. Selected Balance Sheet Data:

Inventories:

Inventories consist of (in thousands):


	September 30,		June 30,
	2024		2024

Raw materials	$	81,786	$	79,377
Finished goods⁽¹⁾		108,811		106,072
Inventories, net	$	190,597	$	185,449

⁽¹⁾Finished goods inventory of $5,556 and $5,718 is included within Other Assets in the September 30, 2024 and June 30, 2024, Consolidated Balance Sheets, respectively, 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):


	September 30,		June 30,
	2024		2024
Land	$	8,161	$	8,150
Buildings and improvements		250,206		243,863
Machinery and equipment		228,648		215,948
Construction in progress		32,186		39,749
Property and equipment, cost		519,201		507,710
Accumulated depreciation and amortization		(265,262)		(256,556)
Property and equipment, net	$	253,939	$	251,154

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Intangible Assets:

Intangible assets consist of (in thousands):


	September 30,		June 30,
	2024		2024

Developed technology	$	680,747	$	675,674
Tradenames		152,341		151,561
Customer relationships		212,011		211,276
Patents		4,552		4,343
Other intangibles		7,176		12,006
Definite-lived intangible assets		1,056,827		1,054,860
Accumulated amortization		(570,823)		(547,779)
Total intangible assets, net	$	486,004	$	507,081

Changes to the carrying amount of net intangible assets for the period ended September 30, 2024 consist of (in thousands):


	September 30,
	2024

Beginning balance	$	507,081
Other additions		112
Amortization expense		(20,040)
Restructuring impairment		(5,474)
Currency translation		4,325
Ending balance	$	486,004

The estimated future amortization expense for intangible assets as of September 30, 2024 is as follows (in thousands):


Remainder 2025	$	59,111
2026		72,743
2027		62,540
2028		58,821
2029		46,200
Thereafter		186,589
Total	$	486,004

Goodwill:

Changes to the carrying amount of goodwill for the period ended September 30, 2024 consist of (in thousands):


			Diagnostics and
	Protein Sciences		Spatial Biology		Total
June 30, 2024	$	423,449	$	549,214	$	972,663
Currency translation		3,042		6,880		9,922
September 30, 2024	$	426,491	$	556,094	$	982,585

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 qualitative goodwill impairment assessment for all of its reporting units during the fourth quarter of fiscal 2024. No indicators of impairment were identified as part of our assessment.

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Other assets:

Other assets consist of (in thousands):


	September 30,		June 30,
	2024		2024

Equity method investment in Wilson Wolf	$	241,308	$	242,337
Derivative instruments		6,669		9,813
Long-term inventory		5,556		5,718
Investment in Spear Bio		15,000		—
Other		7,168		6,397
Other assets	$	275,701	$	264,265

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.

There were no acquisitions in the first quarter of fiscal 2025.

Fiscal year 2024 Acquisitions

Lunaphore Technologies SA.

On July 7, 2023, the Company acquired all of the ownership interests of Lunaphore Technologies SA (“Lunaphore”) for $169.7 million, in a cash-free, debt-free acquisition. Lunaphore is a leading developer of fully automated spatial biology solutions. The Lunaphore acquisition adds spatial biology instruments to Bio-Techne’s portfolio to accelerate our leadership position in translational and clinical research markets. 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 Diagnostics and Spatial Biology operating segment in the first quarter of fiscal year 2024.

The allocation of purchase price consideration related to Lunaphore was completed in the fourth quarter of fiscal 2024. The fair values of the assets acquired and liabilities assumed as of June 30, 2024 are as follows (in thousands):



	Final allocation at June 30, 2024
Current assets	$	12,155
Equipment and other long-term assets		1,470
Intangible assets:
Developed technologies		60,300
Tradenames		4,900
Customer relationships		1,200
Goodwill		104,650
Total assets acquired		184,675

Liabilities		7,096
Deferred income taxes, net		7,872
Net assets acquired	$	169,707

Cash paid		169,707

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Tangible assets and liabilities acquired were recorded at fair value on the date of close based on management's assessment. The purchase price allocated to developed technology and customer relationships was based on management’s forecasted cash inflows and outflows and using a multiperiod excess earnings method to calculate the fair value of assets purchased. The purchase price allocated to trade names was based on management's forecasted cash inflows and outflows and using a relief from royalty 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 14 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 8 years. The amount recorded for trade names 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 trade names ranges from 4 years to 8 years. The net deferred income tax liability represents the net amount of the estimated future impact of adjustments for costs to be recognized as intangible asset amortization, which is not deductible for income tax purposes, offset by the deferred tax asset for the calculation of acquired 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, 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.

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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
	Balance Sheet Location	September 30,		Inputs Considered as
		2024		Level 1		Level 2		Level 3

Assets
Derivatives designated as hedging instruments - cash flow hedges	Other current assets	$	250	$	—	$	250	$	—
Derivatives designated as hedging instruments - cash flow hedges	Other assets		6,669		—		6,669		—
Total assets		$	6,919	$	—	$	6,919	$	—

Liabilities
Derivatives designated as hedging instruments - cash flow hedges	Other long-term liabilities	$	269	$	—	$	269	$	—
Derivatives designated as hedging instruments - net investment hedge	Other long-term liabilities		8,041		—		8,041		—
Total liabilities		$	8,310	$	—	$	8,310	$	—

Total

carrying

value as of

Fair Value Measurements Using

Balance Sheet Location

June 30,

Inputs Considered as

2024

Level 1

Level 2

Level 3

Assets

Certificates of deposit⁽¹⁾

Short-term available-for-sale investments

1,072

—

Derivatives designated as hedging instruments - cash flow hedges

Other current assets

805