Bio-Techne Corp (TECH) — Q2 2015 Earnings Call Transcript

Good morning and thank you for joining us as we discuss the second quarter results of fiscal year 2015. Also on the call this morning is Chuck Kummeth, Chief Executive Officer of Bio-Techne. Before we begin, let me briefly cover our Safe Harbor statement. Some of the remarks made during this conference call may be considered forward-looking statements. The company’s 10-K for fiscal year 2014 identified certain factors that could cause the company’s actual results to differ materially from those projected in the forward-looking statements made during this call. The company does not undertake to update any forward-looking statements as a result of any new information or future events or developments. The 10-K as well as the company’s other SEC filings are available on the company’s website within its Investor Relations section. During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to the most comparable GAAP measures are available on the company’s press release issued earlier this morning or on the Bio-Techne Corporation website at www.biotechne.com. One other item before we get started, and as I mentioned last quarter, please note that the commentary today regarding the total company’s Q2 organic growth by end market and geography do not include performance of protein platforms. Now I’ll turn the call over to Chuck.

Thanks Jim, and good morning everyone. Thanks for joining us today for our second quarter earnings call. We continue to develop and implement our plan of moving our core organic growth into the mid-single digit range. In Q2, I am pleased to report that we achieved 4% organic growth. Equally important, the growth was widespread throughout the company, growing organically in each of our major regions - North America, Europe and China, in both of our major markets, biotech pharma and academia and government, and in each of our reportable business segments. Of particular note, Europe returned to organic growth despite the currency headwinds and economic uncertainty that plagues the region, and China returned to last year’s track record of growing north of 25%, this despite the ongoing anti-corruption audits being performed by the Chinese government that are still impacting the release of research funds there. Here in North America, we continue to see steady improvements in our academia and government markets, achieving positive growth for the first time in many quarters. We believe this is the result of executing our strategies, including expanding our commercial reach by partnering with the Fisher channel, and launching fighter brands that offer more choice to these customers, both of which are starting to take hold. It is important to note that the R&D Systems brand remains the premier brand under which we develop the highest quality bio-active products which differentiate themselves from our fighter brand product lines. Always mindful of our bottom line, we also grew profitably in Q2 with both adjusted earnings and operating cash flows increasing by double digits in the second quarter over last year. Our core growth in operating margins continued to hold steady versus last year, even with the investments we continue to make in our people, our systems, and our website that will enable us to support what we believe will be a much larger company in the future. Speaking of our people, I’m extremely proud of the work they have done and continue to do to integrate our most recent acquisition, realizing tremendous benefits for our customers and ultimately to our shareholders. These include but are not limited to our teams from PrimeGene, Novus and R&D Systems working together to align our brands and products into new offerings, giving the customer more choice in bio-active reagents and increasing the chance that their product needs will be supplied by Bio-Techne. We continue to make good progress with our commercial partner, Fisher. Nine months ago when we launched the partnership, we received about 20 to 30 orders a day. It’s now well into the hundreds. The market reach Fisher gives us is one key component how we have moved to positive organic growth again in the academic and government segment. Our team from R&D Systems, ProteinSimple, and Novus are developing the only antibodies that are qualified for use on the game-changing Simple Western platform. Since the acquisition, we have now qualified over 600 antibodies for the Simple Western platform and expect thousands more over the coming years. Our teams from ProteinSimple, CyVek, and R&D Systems are developing qualified assays to expand our commercial offerings of solutions using the Simple Plex platform, Ella, the recently rebranded immunoassay CyVek instrument. We are extremely excited about this platform and currently have over 50 assays developed and ready to commercialize with Ella. Both ProteinSimple and CyVek teams are working aggressively to find manufacturing and commercial synergies that will accelerate the launch of Ella and thus immunoassay solutions for our customers. Again, binding content with instruments in a proven full solution for the customer is one of our core new strategies. Also, our teams from both Novus and R&D Systems continue to leverage their collective experience, IT and marketing resources to enhance the Bio-Techne web experience and ecommerce capability for our customers. Our clinical controls division continues to meet our objectives, both from a financial and product portfolio point of view. We consider Bionostics fully integrated at this point and now are turning our focus toward other acquisition synergies within the biotech division. Our employees are very busy executing the integration activities described, but busy with a purpose, a mission and determination in building a great company that works together to provide unique and complete solutions to barriers our customers face in driving new life science discoveries and knowledge. This is what motivates us and what will drive us in achieving our long-term goals. Before we turn the call over to questions, I’ll ask Jim to provide some details on the financials for the second quarter. Jim?

Thanks, Chuck. I will provide an overview of our Q2 financial performance for the total company, and then I’ll provide some color on each of our three segments. Before I get into the details of our results, I want to address two events that occurred in the second quarter which materially impact our financials as compared to the prior year. The first event was the early November acquisition of CyVek, a company in which we previously had a minority ownership position of just under 20%. Since this transaction was conducted in stages, Bio-Techne is required to re-measure our previously held equity interest in CyVek and its acquisition date fair value, and recognize any resulting gain or loss in earnings. Consequently, a gain of $8.3 million was triggered in the second quarter of fiscal 2015 as a result of the company’s purchase of the remaining 80% interest in CyVek. The fair market value was determined based on consideration paid in Q2 of $60 million plus a potential earn-out payment of up to $35 million based on CyVek attaining certain revenue targets over the 30-month period following the closing. This gain is not considered income for tax purposes, thus it drops straight to the bottom line net earnings for Q2 and positively impacted GAAP earnings per share by $0.22. In our adjusted net earnings and adjusted EPS, we have removed the impact of this gain to allow for a more transparent comparison to historical results and a more helpful assessment of ongoing operating performance. With regard to CyVek’s operational results, these were included in Bio-Techne’s consolidated financials for the month of November and December, and it impacted the company’s second quarter GAAP reported EPS by negative $0.03 and adjusted EPS by negative $0.02. We expect this run rate to continue for the next several quarters as full-scale commercialization, manufacturing and services activities for the Simple Plex platform ramp up. The second event that materially impacted Bio-Techne’s financial results in Q2 was not company-specific but rather a macro event of a strengthening U.S. dollar that impacted many, if not most companies that sell products outside the United States in local currencies. As a reminder, approximately 28% of our biotech segment revenues are generated in Europe and sold in European-based currencies. With the rapid rise of the U.S. dollar versus these currencies in the second quarter, Bio-Techne faced headwinds that impacted revenue by negative 2% and EPS by negative $0.02 when compared to the second quarter of fiscal year ’14. Assuming foreign exchange rates do not materially change from where they stand today, we expect the effect over the next several quarters compared to prior year to be approximately double the impact we had in Q2. Now I’ll discuss the overall financial performance for the second quarter. We delivered a solid quarter, resulting in a 10% increase in adjusted earnings to $30.3 million with adjusted EPS of $0.82. Under GAAP, EPS was $0.89 in Q2 compared to $0.68 in Q2 of 2014, with the increase including the previously mentioned gain on our CyVek investment partially offset by other acquisition-related costs and amortization of intangibles. On the top line, Q2 reported sales were $111.9 million, an increase of 33% year-over-year and organic growth of 4%. Q2 sales included 31% from acquisitions and a negative 2% impact from foreign exchange. By geography, North America increased in the low single digits organically. Bio-pharma sales were strong in North America with growth in the high single digits, while the academia/government market experienced slight positive growth. Europe grew organically in the low single digits with strong academic growth partially offset by research project timing in the regional bio-pharma market, particularly in Germany. China experienced exceptional organic growth in the high 20’s despite the ongoing Chinese government anti-corruption audit activities that are slowing the release of research funds there. In the Pacific Rim, growth was in the high single digits. Moving on to the details of the P&L, total company adjusted gross margin came in at 71% in Q2, down 170 basis points from the prior year due to the product mix change associated with the acquisitions of Novus and ProteinSimple in July. Excluding acquisitions, gross margins were essentially flat compared to last year. Adjusted SG&A in Q2 excluding the impact of acquisitions was 17.3% of revenue, approximately 140 basis points more than the prior year driven by higher stock compensation expense. R&D expense came in at 9% of revenue for the quarter, 40 basis points below the prior year. Looking at our results below operating income, net interest expense in Q2 was $266,000 compared to $545,000 of net interest income last year as a result of a line of credit that was opened in July to partially fund the acquisitions of ProteinSimple and CyVek. The other expense income line includes this net interest expense as well as the $8.3 million gain recorded on our existing investment in CyVek, as explained in my opening comments. Our adjusted effective rate in Q2 was 30.3%, down 100 basis points from second quarter of last year due to acquisition mix and tax planning activities. In terms of returning capital, we paid out $11.9 million in the form of dividends to our shareholders in the quarter. Average diluted shares were 37,211,000 in Q2, up 283,000 shares or less than 1% from last year as a result of option dilution. Turning to cash flow and the balance sheet, the headline number is $35.7 million of cash generated from operations for the second quarter - that’s up 14% over the prior year. Our Q2 investment in capital expenditures was $3.1 million. We ended the quarter with $140 million of cash and short-term available for sale investments, up $9 million sequentially from the end of Q1. The remainder of free cash flow from the quarter was mostly used to pay dividends and partially fund the acquisition of CyVek. In conjunction with funding the CyVek acquisition, our outstanding line of credit increased from $112 million at the end of Q2 to $144 million at the end of Q2, and we also booked a $35 million long-term debt obligation with regards to the potential earn-out payment for CyVek attaining certain future revenue targets, which we view as likely to occur. That wraps up my comments on the total company performance for the second quarter. Now I’ll walk you through the performance of each of our three business segments, starting with the protein platform segment which now includes our recent acquisition of CyVek in addition to ProteinSimple, which was acquired last July. In Q2, net sales for protein platforms were $20.3 million, already due to this segment in the total company this year. On a pro forma basis assuming ProteinSimple and CyVek were owned for the entire quarter in both current and prior years, organic revenue for the protein platform segment grew 33%. In the quarter, we saw extraordinary growth from both the biologics and Simple Western product lines. Simple Plex, the rebranded tech line acquired via CyVek, reported nominal revenue in the second quarter as the marketing activities and commercial integration with ProteinSimple were preparing its flagship instrument, Ella, for a full-scale launch in Q3. Q2 adjusted operating margin for this segment was 17.6%. As an independent company, ProteinSimple reported 11.8% adjusted operating margin in the quarter ended December 31, 2013. Turning to the biotechnology segment, Q2 net sales were $78 million with reported growth of 10% compared to last year and organic growth of 5%. In the quarter, we had a recovery back to growth in the academic and government markets in both the U.S. and Europe. The U.S. bio-pharma market remained strong and China’s revenue accelerated back to growth rates we saw last year. Adjusted operating for this segment increased 3% in Q2 and adjusted operating margin was 50.3%, a decline of 375 basis points from prior year. The lower adjusted margin percentage is mostly attributable to a change in product mix associated with the acquisition of Novus along with infrastructure investments. Our clinical control segment had Q2 net sales of $13.7 million with both reported and organic growth of 2% compared to last year. Revenue in Q2 was impacted by timing of a shipment to a large OEM customer. Year-to-date, organic growth is 6% and this growth rate is more indicative of what we expect from business segment over both the intermediate and longer term. Adjusted operating income for this segment increased 4% in Q2 and adjusted operating margin was 27.9%, an increase of 50 basis points in the prior year. That concludes my prepared comments, and with that I’ll turn the call over to the moderator to open the line for some questions.

Good morning. Could you talk about what was the adjusted op margin, Chuck, for the consolidated entity?

I think overall, we’re just under 40% total. As we proceed with acquisitions and integrate them, we’re making some gains back. We expect to be in the low-40s range going forward. This is a result of the mix within our core business. Our core business margins are nearly flat. We have been closely monitoring this along with our investments, operating promotions, and competitive strategies, and overall our core has performed quite well. We have effectively reduced costs in the biotech area, which is our largest business. We are experiencing some leverage; we actually improved our margins due to the scale of the business more than anything else.

There will be fluctuations with timing of investments versus revenue. I think it’s important to remind you that year-to-date, our op margins, our adjusted operating margins are 41%, and that’s probably more indicative of what we see going forward.

And in protein platform, was that 33% organic for the entire segments combined?

Yeah. CyVek basically had nominal revenue in the quarter, so for the most part it’s ProteinSimple.

And then you had mentioned earlier in the call that you have 600 qualified antibodies for the ProteinSimple. Does that mean that the catalog is now out? Can you talk about how that's going to impact the sales line, this 600 qualified you mentioned earlier?

Sure. You know, our goal along with buying instruments businesses is to find leverage, synergies with our content, so what we had in mind from the very beginning was to qualify antibodies because we have a large portfolio of them ourselves. We also through Novus have the largest portfolio really of anyone in the world, and we’re looking through those and we’re trying to find the runners and the ones that people are most interested in, and qualifying them on this instrument. What that means is we’ll do the testing for the customer, so we will figure out the dilution factor and the levers you pull to make these things actually run at their best performance on this instrument without wasting content that the customer otherwise has to do. This is done online, so we have a trademark certification symbol, so when you look up and you search for the reagents online on our website, you will see which ones are certified for this platform and which ones are not. That’s a big promotion - we’re just starting it. I mean, the ink is just drying on all this stuff right now. So the catalog is virtually online, as they are all now, and there’s roughly 600 that are certified ready to go and are for sale. We have actually uploaded over 135,000 antibodies on both the Novus site and the R&D Systems site, so we’re well ahead of, I think, our original schedule for integrating Novus and the antibody portfolio into the norm here. So this phase is next with that ProteinSimple piece, and on to Ella next.

Lastly, I guess those number of qualified antibodies, how many were qualified, let’s say, end of September?

We started around August, possibly around 200 in September.

Okay, thank you.

I will make one comment. We want to do 1,000, and it’s harder than you think. We’ve kind of indicated what customers have been telling us, that it’s hard to make antibodies work as advertised on all these kinds of platforms, and we discovered that firsthand as well and we’re experts in both the content and the instrument, obviously. So we’re at 600. Over the coming years, we’ll probably get into thousands, but customers are right - you’ve really got to do some work here to make these things work the way you want, and they’re not all created equal. So my team was a little bit down, thinking golly, they missed the 1,000 antibody goal. I was actually kind of happy because they vindicated what customers have been saying. So hopefully we can do that heavy lifting for the customer and that’s just going to create a whole other layer of value for us.

Hi, good morning. Could you elaborate on some of the strengths you saw, or the rebound I guess in Europe and U.S. academic, and whether or not there was any benefits from a big bolus of orders, and kind of what you’re thinking for expectations in those segments for the remainder of the year?

Europe continues to have a mixed performance. Last quarter, we mentioned the challenges in Germany, which are still present, and France is also experiencing some softness. However, the rest of Europe is performing reasonably well, particularly the U.K. It's a situation of varying results. While academia showed overall strength, bio-pharma timing has played a significant role. We have secured many large accounts, and they are starting to bounce back. This mirrors last year, where we faced significant challenges in our immunoassays and other products but saw a strong recovery this year thanks to larger orders from these major companies. We are all learning how to navigate these dynamics. Regarding the rebound in academia and government, Fisher plays a crucial role. We're currently assessing the sources of this growth, which is difficult given the volume of accounts we process. Our website's progress is notable; with our IT team from Novus, led by their marketing head, we've seen improved ecommerce activity. The most significant influence appears to be the consistent growth generated by Fisher, which has been very effective for us. Working together with Fisher has proven to be mutually beneficial. Many academic institutions rely on Fisher for their lab supplies, and being a part of their network offers us considerable advantages. We're at the platinum level, which provides us with special privileges, and we're pleased with this arrangement. Last year, we faced persistent negative growth, but we saw a negative 6% last quarter, and now we're nearly flat in academia with a slight positive movement. While I don’t expect rapid growth into high single digits, we're making gradual improvements. As we develop more content and comprehensive solutions, such as certified antibodies, we anticipate further strengthening our core offerings.

Okay. Then in terms of China, are you still making investments there or do you think you’re currently scaled properly, given some of the government issues there?

We’re likely at the beginning stages in China and just starting our journey. Our team has expanded from 12 to 100 people in under two years. Most of our sales personnel come from PrimeGene, the acquisition that increased our commercial staff to about 30, and we now also have a ProteinSimple team, bringing our total to around 100. We’re exploring additional assets and investments in the region as well and will continue to grow the team. Navigating the various channels in China is complex, but we have rebounded well and were not significantly affected by the audit issues there. This seems to be a bigger concern for others in the industry than for us. We’re putting in a lot of effort, and things are progressing positively. We are currently building a new factory with PrimeGene and exploring another factory in Suzhou for other strategic initiatives that I won’t go into detail about right now. We have many plans to expand our presence in China, which is where the growth opportunities are. We will see if we can maintain a full 25% growth for the year, but we are still on track for over 20%, which should outpace most of our competitors, thanks to our teams, and we are optimistic about our prospects. In the realm of content in China, it’s still in its early stages. For instance, stem cell and tissue research are rapidly advancing, and we are still at the starting point.

All right, great. Then any expectations on CyVek contribution this year, or Ella, and content that you can share?

Yeah, we have a kind of 30-month fuse here on hitting the next milestone, so that’s kind of the guidance we’re giving. Since we’re about eight months or so ahead of forecasts or schedule on picking up control, you can assume that we’re going to be ahead of schedule on the launch as well. I think we’ll be probably at between the million and $2 million run rate within the year here, within a quarter or two - we’ll see. The launch is just starting. We’re really excited about the naming, the branding. Everything about it looks great, looks nice. The content is ready to go for a good launch. We have the right set of larger customers that are very interested. Again, long term we’re hoping this becomes a companion diagnostic standard. It’s getting more momentum and more interest the more we work with it, and now we’ve got a 100-person commercial sales force with ProteinSimple to actually help take it up. We don’t have to reinvent the wheel here with the acquisition of CyVek, so they’re all very excited about it. The training is all completed, form, fit and factor is done, colors, everything is done, promotion. So the launch begins and we’re hopeful of good news for you in a quarter or two here.

Great, thanks a lot.

So soon we’ll know how to sell new instrument platforms on ProteinSimple, so we’re counting on big things.

Good morning, guys. Thanks for the questions, and thanks for the color on the core margins. It’s good to hear that those are basically stable. My question really is on the acquired businesses across all the segments here. How should we think about the margins on those businesses? I guess the big one here is ProteinSimple, but how should we think about the acquired margins over the next few quarters? What’s the trajectory there?

Yeah, well as Jim pointed out, year-on-year we’ve gone from 11 and change to near-18 on ProteinSimple, so they’re ramping pretty fast as we build scale. We’ve always said that long term, that business should get into the mid-30s for operating margins, in that range. It won’t probably get all the way to content, but we’re talking about a platform that’s roughly 70% gross margin, and over time as we have more consumables go with that business, the mix is going to improve it some. The IT, we think is very sound - that’s the key to all this, of course. Most instrument businesses are in the 50s and so on, so we’re pretty bullish to get to the low to mid-30s here within the next year or two.

Yeah, and Jeff, all this share data will be in the Q as well, but if you actually pull out the CyVek dilutive impact this quarter, the adjusted operating margins for ProteinSimple would have been north of 20%, so about a doubling of their operating margins just in one year. So they’re on a very, very nice trajectory, and as Chuck mentioned, our longer term models have them hitting 30% range, so they’re definitely on that track.

Got it, that’s great. CyVek, the dilutive impact, what do you think that will be over the next couple of quarters? Is that still in that negative $0.02 range?

Yeah, I’d say for the next couple quarters, although we do expect there to be some revenues ramping up here in the coming quarters. There’s continuous investment that’s going right along with it, so we see it being dilutive for the next couple quarters but our goal all along is for that to become accretive after about a year.

Got it. Then Chuck, just a big picture update on the competitive environment. You’ve made a lot of strides here over the past 18 months on building up the company, but I guess have you seen a competitive response? What’s the state of the competitive environment right now?

I think we all just returned from the latest industry conference, and I believe everyone would agree that things are looking quite positive overall in this industry. Currency fluctuations and global events are significant challenges, particularly with the exchange rate from Japan going from the high 80s to around $1.20. This change will affect the buying and purchasing power of distributors in Japan, and we're noticing that impact. We are also observing some competitive reactions, particularly from companies like Abcam, who seem to be paying more attention to us. However, we still consider ourselves quite unique, and many of our competitors are relatively small. My concerns are more about their specialized focus and independent actions. We aren't overly concerned about larger companies like Thermo Fisher; instead, we view them more as partners. We collaborate extensively with Thermo Fisher and have projects with nearly everyone in the industry because our capabilities are broad. However, I do have concerns about smaller companies becoming stronger and the potential emergence of new players in China, as there are many new entrants and innovations occurring there that we need to keep an eye on. Overall, I don't believe we need to reevaluate our strategy. I think our strategies are effective and we plan to continue with them. We just wrapped up this year’s strategic plan, and aside from incorporating a new chapter on protein platforms, not much has changed. We're particularly excited about returning to positive growth in the academic sector and hope, like everyone else, for improvements in NIH funding. If funding does not improve, we'll pursue market share with the strategies we've outlined.

Great, that’s helpful. Thanks.

Hi guys, it’s Matt Tiampo in for Matt Hewitt. We were just curious on a couple of things quickly. First, how is the rebranding of CyVek to Ella progressing, and what’s the response been like from your customer base?

Well, the launch is really just happening, so it’s too early to tell. We looked at some other names, and Ella was the winner, and I really like it. Everyone is just in love with it. It has a look and feel - we’ve got the color scheme of the West. It looked like brother and sister out there, it’s all by design. This group knows how to market stuff, they know how to sell stuff, so we’re pretty pumped to see what happens here. So it’s early. Next quarter would be the better time to answer that question with some initial data, but the ink isn’t even dry on this stuff.

The early indication is actually from the ProteinSimple sales force themselves, which have embraced this new product line and are just absolutely excited to get out there and start selling it.

It’s really been positive, to the point where we’re trying to remind everybody, let’s not forget about West now too, guys.

Great, that’s great to hear. Second thing we were a little bit curious on, did you see an impact last week from the storms in the northeast?

That’s a good question, and yes we did. But you might remember this coming quarter a year ago, all of us suffered about five days of loss in shipments. We’re a run rate business, and we dug through that pretty well, but we definitely have a couple days at this point for this quarter that are impacting us. In our business, when the researchers don’t go into work, they don’t use stuff; and if they’re not using stuff, they don’t need to order more stuff. So it isn’t like instruments where it’s not a big impact, so we’ve got a couple days to worry about but so does everybody else.

Hi guys, just a few quick follow-ups. Novus and PrimeGene on a Q-over-Q basis, just looking at it backwards, was 7% contribution in the quarter. Is that just seasonality? I think I had 10% last quarter, so just trying to think of how that’s performing. Is it seasonality, or is there something else going on that we should know about?

With PrimeGene, there is definitely more timing involved; it's primarily an OEM business model, and we currently have several timing orders with them. While it's not overly significant, it's relatively small. As for Novus, we are nearing our target. We are focused on integration, and the team from Novus has been fantastic in assisting us, particularly on the IT side, helping to get everything online, update content, and refresh the website. The changes you've seen on our website in the past couple of months are largely thanks to the Novus team collaborating with our IT staff. Progress is being made. Regarding Europe, there may be a slight softness; we are dealing with standard integration challenges, such as harmonizing distributors, but nothing substantial to report.

At some point, are you guys going to break out the contribution that you guys are getting online from the Novus platform? I think you cited 135,000 reagents online now that weren’t in the past. Is that something you can break out in the future, or something you want to shy away from?

Probably not, because I really want to fully integrate Novus into R&D Systems, so. Our biotech division will have all this stuff in it, and we’ll report division results for content's sake.

But at a high level, we do track metrics regarding order taking on the web versus phone and fax, which is kind of the traditional way of doing business. Those metrics continue to dramatically improve, and we’re moving towards electronic-based overtaking them.

Yeah, and a lot of cross-selling is happening now, and I will mention since Jim brought it up here too, that a little over less than two years ago when I joined, two-thirds of all orders were phone and fax. You guys have always heard these fun facts, which is still kind of amazing, but we’ve reduced that by a factor of two here, so we’re roughly a third to 40% now. So a lot of that is better e-commerce, better web systems online now. A lot of it is Fisher, more EDI. We’re slowly getting into the 21st century here.

Is there any way you can give us high level just of the 7%, the mix on Novus? I’m just thinking, is the bigger step function down q-over-q Novus, or was it PrimeGene?

On an absolute dollar basis, it was PrimeGene. PrimeGene had some very large orders with a very large customer that tend to be lumpy, and that impacted PrimeGene. Novus was in the mid to high single-digit growth rate, so they performed as planned.

Okay, and lastly for me, I think you said there’s a CC order that was pushed out. Can you give any color on that - the size of it, when you think it’s going to come through?

Well you remember last quarter, I think we were roughly 13% growth in clinical controls, so it’s all timing. We’re 6% year-to-date, and we’re going to end right on schedule there forecast, maybe even a little bit better. It’s all timing. Again, this is very much an OEM-driven business as well, and we have some order timing.

It’s a combination of stuff that got pulled in last quarter and a couple of orders that pushed out this quarter, so you’ve got to kind of look at it over the year-to-date to get a true sense of the trajectory.

Okay, but you think they’ll recognize in Q3?

Yeah, I think we should be fine.

Our growth rate should be commensurate with what our year-to-date one is.

Appreciate it.

Bionostics is really working according to plan there. Their funnel, their pipeline is pretty healthy. It’s in line with the core business here that we integrated into, our hematology controls business. They’ve always been kind of steady as she goes between 5 and 7%, and we don’t see any issue with that.

Hi, good morning guys. Just a few follow-ups, actually, on Paul’s original line of questioning. In terms of the antibodies that you rolled out on the ProteinSimple platform, was there actually any revenue contribution yet? I know it’s early. And then also, are you going to account for that or would that flow through the protein platform line as well, the incremental antibody revenue?

No, it will stay on our biotech side. I believe in a matrix model here, and that’s what we’re running. The consumables and the cartridges with CyVek would probably for the short term be with protein platforms, but all reagents, all antibodies, all that will be biotech, and I want these teams working together and they’ve got to work towards the big picture together. In terms of any contribution, it’s just really launched in the last month or so, so there’s probably some incremental. It’d be hard to measure, but it will grow in time. As you know, Amanda, there are no home run products in this space. It’s a thousand paper cuts kind of model, so.

Yeah. I mean, it definitely is early days for Q2. Literally, this was getting all finalized in the last couple weeks of the quarter, so there’s fairly minimal, if any, impact in Q2.

It’s mainly to get the website, get stuff on. They’ve been getting it ready to go all quarter, but getting everything online to be positioned and certified with this new trademark symbol we came up, all that, it takes time to get that even to register in customers’ minds.

Got it, and regarding the Fisher relationship, I appreciate the details about the volumes. I know it's challenging to analyze, but now that you've been working with them for a few quarters, do you have any insights on where that relationship might head from an additive perspective?

Ultimately, we hope to see continued growth. I don't expect significant jumps but rather a steady progression in the right direction. As you know, there have been many changes within the team, and I'm quite close with Greg Herrema, who now oversees all of Fisher. We're collaborating more and having regular discussions. I've been pleasantly surprised by the openness of the life tech side of the business, and they have also been engaged in discussions, leading to numerous connections and strong relationships. It's been very positive. We hope they continue to focus on us and promote our interests as we work together. There are various aspects, like punch-outs and e-commerce software, that necessitate a strong partnership with the IT side to ensure success on a university-by-university basis. The data we've received shows there are hundreds of thousands out there, so it's crucial to stay in front of them and ensure Bio-Techne is top of mind. As long as that happens, we will continue to collaborate. Simultaneously, we maintain our direct approach and have our own accounts, with no exclusivity issues with Fisher. Working together benefits all parties, especially as more funding comes through. This allows us to further discuss our strategies with key opinion leaders, prioritize effectively, and develop more significant G&P-related content. Ultimately, innovation is key. By building a robust portfolio of high-quality content supported by the premium R&D Systems brand, we can capture a larger share of spending. That's our overarching strategy. Innovation and channel partnerships are both essential.

Got it. Just one last question about the fighter brand. Are you seeing any potential cannibalization with the premium brand? Are there any risks or concerns that you've observed so far?

Well, there’s always risk, and I think over time we’re going to have to eat a few of our children. But right now, there really hasn’t been. We’re really focusing our strategies on any accounts that really came on stage last year towards the low end and have walked away from the premium R&D Systems, so we’re attacking there first. It’s been very successful initially with the Novus and PrimeGene brands. I think as you find bigger accounts that are in the middle with multiple cow points and you’ve got both R&D Systems brand, they’re burgeoning, but they’re also buying our competitor, it gets harder, it gets more difficult. But we’re working our way through it. I think ultimately you’ve got to do it over the web with that academia sector, with an optimum web experience, and that’s what we’re focusing on in the long term to try and manage this. Long term, we’ll have an integrated search engine-based web that will have all brands, and you’ll be able to really pick what you want and you’ll be able to even buy from different sites all in the same basket, shopping cart, and move from there. We’re a year or less away from that, so more coming but it’s kind of like that. It’s hard to measure, but we know we’re getting some impact there. We’ve also brought in a couple more finance people on board as we continue to build out our systems here, and we’re working our way towards having data warehousing and the right data mining, so we’ll have more of this kind of data to work from.

Hey Chuck, I’m back. How was seasonality in the quarter? I know the last two weeks could be good or bad, depending upon how holidays fall and weather goes. Was it as expected on that seasonality issue in the quarter?

Yeah, I’d say a pretty insightful question, Paul. I would say we did get hit a little bit in the end, mainly on the OEM side. I don’t know if it was the timing of the holidays or what, but some of the timing we alluded to kind of got us in the last couple weeks. We still pulled out 4% organic growth, so we’re pretty happy, so we’ll see what happens. But there was a little bit of seasonality there, and we’re trying to figure out if it was really seasonality or was there something else somewhere.

It actually impacted the two that have been kind of most talked about on this call, which are the PrimeGene and our C2B business, which has the most OEM large account-type business, and those were impacted the most.

And then I don’t know if you care to comment, but I’m sure you follow daily orders. How’s tone of business here in the calendar Q1?

It's really challenging right now since it's still early in the year, and we've already faced some weather issues, particularly due to the storm that affected the Midwest yesterday. I wouldn't say we're seeing record-breaking results yet, primarily because of the weather, so we'll have to see how things develop as we move forward. January typically isn't a strong month for us, so we'll keep an eye on it. However, we don't have any early signs of trouble at this stage. We're all monitoring the same factors, including currency fluctuations and the situation in Russia and Japan, which makes the outlook feel somewhat cautious. On a positive note, I haven't seen anyone else's numbers that compare to ours in China, which suggests we're currently ahead in that market, so we plan to continue focusing our efforts there.

And that momentum is continuing.

Thank you again.

All right, well I think this is a record for us for the length of time in the call. I appreciate it from all of you. If there’s any more questions, we do have time; otherwise, I’ll make a slow-winded goodbye and thank you for everything. We’ll talk to you next quarter.

Thank you.