Bio-Techne Corp (TECH) — Q2 2016 Earnings Call Transcript

Good morning. Thank you for joining us. 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 comments made during this conference call may be considered forward-looking statements, including beliefs and expectations about the Company's future results. The Company's 10-K for fiscal year 2015 identifies 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 the 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 most comparable GAAP measures are available in the Company's press release issued early this morning and on the Bio-Techne Corporation website at www.bio-techne.com. And with that, I'll turn the call over to Chuck.

Thanks, Jim, and good morning, everyone. Thank you for joining us for our second quarter conference call. This morning we reported revenue growth of 8% for the second quarter, with the majority of our end markets remaining strong organically and a solid contribution from our recent acquisitions. I'm extremely pleased with the achievement of 6% organic growth corporate-wide, with our core business growing organically at 7%. This reflects a strong contribution from both our biotechnology and clinical control segments. Protein Platforms remains in a recovery period. Although we're seeing increased commercial traction, this segment remains on track for a reacceleration in the second half of fiscal 2016. Starting with our biotechnology business, our biopharma end markets remain strong, with revenue increasing in the upper single digits for the quarter. Our biopharma customers continue to recognize the benefits of outsourcing the development of complex bioreactive molecules to Bio-Techne. Our reputation for high-quality proteins, antibodies and assays continues to drive additional custom reagent development for the biopharma customer set. This enables a more sticky relationship with our customers, creating opportunities to meet additional client reagent needs as the relationship evolves. Our academia and government end market grew in the low single digits, as it has for several quarters now. We believe one of the keys to driving long term growth within our academia customer base is the ongoing improvement of our website. Encouragingly, the recent enhancements to our Bio-Techne website are generating increased Internet traffic with both number of visits to our website and online ordering activity growing mid-single digits year over year. In fact, our Novus Biologicals brand, which was the first of our brands to use the enhanced website, observed revenue growth in the high single digits this quarter as a result of the improved web experience. The continued emphasis on search engine optimization and adding more product content to our website should continue to build revenue momentum from our academic markets going forward. Increases in NIH funding recently passed by Congress should also provide a modest tailwind. Europe performed well in Q2, with mid-single-digit growth that was broad-based in the region. Our European biopharma business was particularly strong, with its research cycle returning in fiscal 2016 generating growth in the low teens. Our commercial team has executed very well there, as this is the third consecutive quarter with mid-single-digit growth in Europe. China was a standout in the quarter, delivering another stellar performance with organic revenue increasing 30%. We continue to view China as very much an emerging market for life science reagents, especially for those provided by Bio-Techne. The increasing demand for healthcare will drive further investments in life science research, benefiting our still relatively nascent business in this geography. In the Pac Rim, Japan remains a drag on growth, with our Japanese business down mid-teens in the quarter, consistent with recent quarters where the Japanese funding environment remains challenging. These issues are taking longer than expected to improve, although we're hearing that funding will begin to be released in February, representing a potential catalyst to return our Japanese business to growth by the end of fiscal 2016. Excluding Japan, our Pac Rim revenue increased upper single digits in Q2. Finally, I want to highlight the operational performance of our biotechnology segment, where we expanded operating margins in Q2 by over 150 basis points from the prior year. This expansion was driven by productivity actions and process improvements that still managed to find efficiencies in an already lean organization. The improvement is even more impressive, considering it overcame over 100 basis points of margin headwind due to unfavorable currency exchange. Overall, we're very pleased with the strong performance within our core biotech product portfolio, with Q2 representing the third consecutive quarter of at least mid-single-digit organic growth in our core business. Getting our core back to consistent, mid-single-digit growth has been the most challenging and complex part of our five-year strategic plan, and I'm proud of our team's effort to get us there, and I have confidence in our ability to maintain this momentum. Moving on to our clinical controls division, we experienced strong performance from both our organic and acquired businesses in the quarter. As a reminder, in Q1, our organic clinical controls division was unfavorably impacted by the timing of OEM delivery dates. As expected, these OEM orders were delivered in Q2, contributing to 10% organic growth for the quarter. Cliniqa, our controls and reagents supplier for the diagnostic market that we acquired last July, outperformed our expectations for the quarter, and I believe we're in the early stages of leveraging the cross-selling opportunities that exist between this acquisition and our legacy clinical controls product line. That said, the addition of Cliniqa's reagent-based products introduces additional products with longer shelf-life similar to our existing chemistry-based Bionostics products, allowing OEM customers to buy in bulk and increasing the potential for quarter-on-quarter segment volatility. Based on customer ordering patterns, we anticipate the revenue contribution from Cliniqa in Q3 and Q4 to look more like Q2 than Q1. Our legacy hematology controls business remains stable, growing mid-single digits. Given the relatively shorter shelf-life of our hematology controls products, we view growth of these products as an indicator of stable underlying demand within our clinical controls end market. Based on stable underlying demand, our outlook for clinical controls remains unchanged and we anticipate annual segment growth to remain in the mid-single digits going forward. Lastly, our protein platforms business remains in a recovery period, with a low single-digit decline in our organic business for the quarter, although total segment revenue increased 18% sequentially over first quarter results. I want to share some of the positive elements of our protein platforms segment that gives us additional confidence in this business during the second half of fiscal 2016. In addition to now having a complete, industry-experienced Simple Western sales force, we're leveraging the entire R&D systems commercial team to generate leads, cross-sell and demo this game-changing Western Blot technology. In doing so, we expanded our pool of potential Simple Western customers by engaging with the vast majority of scientists who are more pragmatic about technology changes in their workflows versus the initial strategy of focusing on early technology adopters. We still feel that this innovative technology will achieve significant share in the Western Blot market that is currently dominated by time-consuming, manual and poorly reproducible processes. Executing on our new commercial plan is beginning to bear fruit, with new lead generation growing 20% and a number of quotes increasing in the mid-teens year over year. We view these metrics as indicators of building interest and awareness in our protein platform workflow solutions as we continue to anticipate at least double-digit growth for this segment beginning in the third quarter of 2016. We're very pleased with the performance of this Simple Plex product line within the protein platforms segment this quarter. As a reminder, this is the rebranded Cydex start-up business we acquired a year ago in November. The revenue ramp of this business consisting of the Ella line of multiplex ELISA instruments and associated assay cartridges remains in early stages, but we're clearly seeing growing interest from our customers for the workflow enhancements the Simple Plex testing platform delivers. During the quarter, we reached a milestone in the Simple Plex product line with Q2 representing the first quarter of double-digit Ella instrument placements. We believe we're in the very early stages of Ella instrument adoption and look to Simple Plex to become a significant revenue contributor in future quarters. While the protein platforms business slightly declined organically year over year, we view the sequential increase as well as strengthening sales indicators as signs that our revised commercialization strategy is gaining traction. Nothing has changed with respect to our favorable outlook for the segment. We're only one quarter into our upgraded sales force and new commercialization strategy and remain on track for a meaningful segment revenue acceleration beginning next quarter. With that, I will pass the call over to Jim for a more detailed review of the financials before we open up to Q&A.

Thank you, Chuck. As on our prior earnings calls, I will provide an overview of our Q2 financial performance for the total company and then provide some color on each of our three segments. Starting with the overall second quarter financial performance, adjusted earnings increased approximately 3% year-over-year to $32.8 million, while adjusted EPS was $0.88 a share versus $0.85 in the prior year. The impact of currency translation was a headwind to EPS by about $0.06. GAAP EPS for the quarter was $0.69 compared to $0.89 in the prior year. Although excluding the prior-year $8.3 million gain on our initial CyVek investment, GAAP EPS improved by $0.02 over second quarter fiscal year 2015. On the top line, Q2 reported revenue was $120.9 million, an increase of 8% year-over-year, with overall organic growth of 6%. Second quarter reported sales included a 6% growth contribution from acquisition, partially offset by a 4% unfavorable foreign exchange headwind. Moving on to details of the P&L, total company adjusted gross margin was 70.8% in Q2, decreasing 20 basis points from the prior year. The year-over-year decrease reflects an unfavorable product mix due to the CyVek and Cliniqa acquisition and unfavorable FX. These are partially offset by strong productivity gains, primarily in our biotech division. Excluding the impact of acquisitions and FX, core gross margins improved by 150 basis points year over year in the second quarter. In the near term, we anticipate gross margins to remain in the 70% to 71% range depending on the product mix. Adjusted SG&A in Q2 was 22.3% of revenue, 130 basis points higher than last year, and R&D was consistent with the prior year at 9.1% of revenue. The increase over the prior year was driven primarily by the acquisitions made since the beginning of the second quarter of last year. Modest investments, largely for commercial activities in China and protein platforms, have also been made. The resulting adjusted operating margin for Q2 was 39.4%. Excluding the impact of FX and acquisitions, the operating margin in our organic business was 41.4%. This compares to an adjusted operating margin of 41% in the second quarter of last year, demonstrating the productivity and expansion of margins we delivered in our core businesses. Looking at our numbers below operating income, net interest expense in Q2 was $0.3 million, essentially flat to last year. Other non-operating expense for the quarter was also $0.3 million. This compares to $0.1 million of non-operating expense in the prior-year quarter, with unfavorable transactional FX explaining the year-over-year variance. Our adjusted FX tax rate in Q2 was 30.1%. That's down 20 basis points in the second quarter of last year. In terms of returning capital, we continue to pay our dividend and paid out $11.9 million in the quarter. Average diluted shares were up less than 100,000 shares over the year-ago period at 37.3 million shares outstanding. Turning to cash flow on the balance sheet, a record $38.5 million of cash was generated from operations in the second quarter, and our investment in capital expenditures was $4.9 million. We ended the quarter with $113.9 million of cash and short-term available-for-sale investments of $26.6 million, sequentially from the end of Q1. Our long-term debt obligations at the end of Q2 stood at $162.8 million, a decrease of $1.6 million from the end of Q1. Going forward, opportunistic M&A, our dividend and debt paydown remain our priorities for capital deployment. Now I will discuss the performance of our three business segments, starting with the biotechnology segment. Q2 reported sales were $75.9 million for organic growth of 7%, exceeding our expectations for the quarter. Foreign exchange negatively impacted reported sales growth by approximately 5%. We anticipate the biotechnology segment to continue to grow organically in the mid-single digits going forward. By geography, the U.S. grew upper single digits organically, with solid biopharma sales growth offsetting flattish academic results. Europe increased mid-single digits organically, with biopharma sales in this region increasing in the mid-teens, offsetting low single-digit growth in academia. China experienced very strong growth of 30%, while the Pac Rim declined upper single digits year over year, reflecting a mid-teens decline in Japan. As Chuck noted earlier, excluding Japan, the Pacific Rim grew in the upper single digits. Adjusted operating income for the biotech segment increased 5% in Q2 compared to the prior year and adjusted operating margin was 52.7%, an increase of 160 basis points year over year. Strong organic growth coupled with productivity initiatives more than cover the impact of negative foreign exchange to the bottom line. Excluding the impact of FX, adjusted operating income increased 11%, topping the segment's 7% organic revenue growth rate and operating margin would have been 53.9%. Turning now to clinical controls, segment sales in Q2 were $25.7 million, with reported growth of 49% over last year. The acquisition of Cliniqa contributed 39% to growth and organic revenue increased 10%. As expected, the timing of OEM shipment orders benefited the quarter, with some of the OEM order timing that impacted Q1 normalizing in the second quarter. Going forward, we expect OEM shipment orders in Q3 and Q4 to be commensurate with Q2, although changes to OEM ordering patterns could introduce potential quarterly variability to segment performance. In the long term, we continue to expect clinical control segment annual organic growth to be in the mid-single digits. Clinical control adjusted operating income increased 42% in Q2, commensurate with the top-line growth. And adjusted operating margin was 28.4%, a decrease of 120 basis points from the prior year due to product mix. Moving on to our protein platforms segment, where net sales in Q2 were $19.3 million, declining 6% from the prior-year period. As a reminder, we have now completely annualized the ProteinSimple acquisition, so any associated revenue from this business is now included in our organic results. Revenue from CyVek continues to ramp, and we reached a milestone of double-digit instrument placements in the quarter. Given the timing of the CyVek acquisition close last year, the contribution from acquisitions was less than 1% in the quarter. And favorable FX impacted revenues by 3%, leading to an organic segment revenue decline of 2%. Despite this decline resulting from the transition of commercial strategy, consumables sales from existing Simple Western instrument placements increased 20% in Q2 compared to last year, demonstrating that our customers really do see the value our technology brings to their workflows. This, together with a significant improvement in instrument sales lead generation and quote activity that Chuck mentioned earlier, gives us confidence in a return to double-digit growth in the back half of fiscal 2016. Adjusted operating income for this segment in Q2 was $1.5 million compared to $3.4 million one year ago. With the CyVek acquisition, foreign exchange and the organic growth decline explain the year-over-year variance. We continue to expect additional improvement in protein platforms profitability as segment growth improves in the second half of the fiscal year. That concludes my prepared comments. And with that, I'll turn the call back over to Katina to open the line for some questions.

Just want to dig into the protein platforms business a bit more. First off, do you have a book-to-bill number you could offer for that segment?

No, we don't offer that kind of data. It's not really like a mass spec to the business, where there's really heavy bookings front-end with it. We pretty much ship what we've built pretty quickly.

Chuck, could you describe the new product pipeline in that segment? Is there anything we should anticipate in the near future?

There is a lot of exciting news there. As you know, there are three different roadmaps of platforms in that company, that business, with CyVek. And we just announced Maurice. We have a new biologics platform that allows us to look at size as well as charge. So it's a dramatic increase. It comes after, I think, five or six years since the last major upgrade in that product line. And we already were experiencing solid growth. We're in high single-digit growth in that platform anyway. So we're really excited about it. And we just announced it last week, I think maybe even two weeks ago, but initial interest has been nothing short of staggering.

Okay. And then my final question, can you characterize the current M&A environment?

It's challenging, and I believe we need more time in this market. While the situation has settled for most biotechs, recovery takes longer than a few months. I hope that costs will decrease. We are involved in the Affy deal, and it’s difficult to compete with larger companies like Thermo when they express interest. However, we remain very committed with a robust pipeline and actively pursue deals as we usually do.

Good morning. Nice quarter guys. First question for me is on the biotech business. Could you talk about what you're doing to improve margins there? You had some really strong improvement in the quarter, even despite the FX headwind. But what are the actions you are taking to drive margins there?

We've discussed this extensively before. When I joined nearly two years ago, there was a lot of operational work needed. I have Six Sigma training, and many of our new team members are experienced leaders from larger companies managing bigger operations. We are methodically reorganizing aspects of our operations, like separating development from manufacturing. We now have a dedicated factory section within our biotech division, which helps us focus on productivity. This part of the organization has performed exceptionally well, with annual productivity challenges that we break down into specific projects and track monthly. For instance, we are recognized for our quality and high bioactivity, and we conduct thorough tests. We're incorporating more statistical methods into our testing approach, which is helping us streamline processes. While we've always maintained a lean operation, there are still plenty of methodologies we can apply to enhance our efficiency further. We have implemented various new systems and technologies, including an extensive online product mapping system. Although it's not strictly an electronic lab notebook, it effectively manages the significant number of new products we create annually—over 1500 to 2000—which necessitates a robust system to track everything. This internal IT system has been significantly improved to make it more user-friendly for all lab employees, regardless of whether they're involved in assays, antibodies, or proteins. Overall, we have many programs and projects in progress, and I would say it has been a great quarter with consistent margin improvements year over year.

That's great. In the prepared remarks, you mentioned the NIH funding increase this year and described the potential tailwind as modest. Why is that considered modest? It is a significant increase that the NIH has experienced. Is that mainly due to timing?

The budget is $31 billion, going up $2 billion. 3% last year to 6.5% this year. Some of that will find its way to us for sure. Everyone buys data on who gets what grants. There's thousands of grants given and we're trying to map those grants by the customers that are getting them as to what who are our customers to see if one institution is getting x amount more grants per this, how big a customer they are for us. But it's hard to quantify. We're sure we're going to have some tailwind from it. I would look at it as nothing more for now and be conservative. It's a nice buffer for us maintaining our mid-single-digit growth in this area. So at least we're not declining. We don't have to worry about compensating for any of that. It's definitely on the right direction. And with a full 6.5% increase in the budget, something should find its way to us. Hard to quantify. As we get further along here, though, this next quarter, we will try to have more data on that.

Couple of questions, number one, what steps are you taking in the ProteinSimple platform? Are you consolidating salespeople, hiring new ones, reassigning them, etc.?

We have significantly restructured our commercial organization recently. We have mentioned this extensively in our prepared remarks today due to the ongoing situation that began about two quarters ago. We are more than halfway through this process and are genuinely enthusiastic about the progress we've made. Over the past three to four months, we have rehired around 60% of our Simple Western sales force. They are fully trained and connected through Salesforce.com, allowing for a comprehensive evaluation of their individual performance in lead generation and closing deals. As Jim noted, we're seeing promising signs; leads have increased by 20%, our pipeline is filling up, and overall numbers are improving. Since we have a nine-month selling cycle, it's crucial to understand that hiring new staff means starting from scratch with accounts. Additionally, there has been a shift in our marketing philosophy. After acquiring ProteinSimple, which was known for its youthful Silicon Valley approach focused on promoting cutting-edge technology to early adopters, we recognized that such early adopters usually seek us out rather than needing a sales push. Our marketing strategy has now evolved, with a new head in charge at ProteinSimple. We aim to capitalize on our extensive network of global researchers through our R&D systems, which we believe will yield positive results. The collaboration between our teams has improved substantially, particularly since our head of sales for biotech has a background in instruments and has played a crucial role in guiding the team back on course. We are implementing not just processes but also systems that provide concrete evidence of our progress, as this is a high-priority focus for our life science professionals. We are targeting a market space worth over $2 billion; however, breaking into it is challenging. It requires sales efforts directed toward multiple stakeholders, and many labs utilize graduate students, making it essential to navigate the traditional methods like Western blots, which are often essential learning experiences for chemists. We plan to conduct more demonstrations and employ classic selling techniques, backed by our team's expertise in this area. While we are not fully through this transition yet, we are on track and confident that we are well over the halfway mark in this process.

I know you had acquired the firm that was working on your Internet marketing capability on the reagent portfolio, your Denver-based asset. Could you provide us an update on where you are in the progress with their offering lineup and the development of that business?

I'll owe you a dollar next time we meet because it’s a great story. The website is excellent. We launched it last summer as planned and within budget, which is something I rarely achieve in my career. The team has done an incredible job. If you've seen our new website, you'll notice it's significantly better than the old version. It includes links to tens of thousands of products, citations, and data. The Pathways section is remarkable. Overall, the user experience has greatly improved, and our traffic is increasing. On the retail side, more traffic and time spent on the website are translating into more sales, and that's happening. The Novus numbers are rising faster than the rest of the portfolio. Since they were already recognized in that area and were the first to utilize the new website, we're seeing stable high single-digit growth. I shouldn't say more, but I believe the future holds even more potential, especially here.

And lastly, Chuck, regarding the reagent portfolio, you are working on expanding the simple protein product line and building a catalog of reagents for the Western blot. Can you provide an update on that?

It's continuing to grow, with over 1,100 certified antibodies. We are building momentum as awareness increases. Customers appreciate the assurance that the antibodies they purchase will effectively work with the system, eliminating the need to waste resources adjusting unsuitable products. This is a common feedback we receive. As Jim mentioned, consumables have increased by 20%, even with a decline in the overall category, indicating that both consumables and content are growing and that people are actively using the machines available. We are pleased about this. Our model in China is performing well, and we've achieved a record quarter with 30% growth in that market. This positive trend is expected to benefit the overall business. People often inquire about how many certified antibodies are necessary. While discussions about needing 3,000 or 5,000 certified antibodies arise, I believe it’s crucial to focus on those that are relevant in applied markets. We are likely nearing the necessary distribution to significantly support this category, but we will continue our efforts because this is the future. Customers desire certified antibodies that work and prioritize quality; they are weary of subpar options. Our strategy is dedicated to providing quality.

Could you just talk a little bit about the three segments of the biologics business? So, thinking about proteins, antibodies and ELISA kits specifically. I think you talked in the past about having some price competition and maybe that has changed a bit over the past year or so. So just looking for an update on how those two businesses are doing specifically.

In biotech, the segments are all roughly the same size, and while we don't share specific figures, they are not vastly different from each other and all hold significance. We are the clear leader in the protein business, but it's the smallest market, with growth estimated at around 3% to 4%. Currently, we are ahead of the market, and our strategy focuses on enhancing quality and providing unique proteins that our competitors can't offer. We have our PrimeGene and Novus brands, particularly for China, where the cytokine and protein market is growing at over 40%, showing strong health. The PrimeGene strategy is proving effective, with a new factory in China that has received G&P approval, and we are pleased with the results. The antibody segment is a larger opportunity for us. We acquired Novus, which is a significant investment, and it varies based on the applied markets. We are experiencing about 7% growth in this area, which aligns with market expectations typically between 6% and 8%. This is driven partly by our new website initiatives. Last year, we launched a minor portfolio that includes 8,000 new sample antibodies priced at $99 each, a first for us to lower the packet size to capture the retail segment. Previously, customers had to purchase larger quantities of Verity Systems' branded products. Our competitors were more flexible, so we made this change, which has been highly successful. Many first-time buyers of these samples have begun to recognize our offerings and place larger orders, which is beneficial. Regarding the assay side, this area is the newest and least explored. Our partnership with Luminex has seen strong growth, and we now sell instruments globally, offering complete solutions. We are also a leader in ELISA, which is why we acquired CyVek. With the CyVek platform, we have developed a next-generation microfluidic parallel ELISA system that we launched last week, featuring a new cartridge with a 72 x 1 configuration, which can be described as a super ELISA. It boasts a dynamic range of 4 to 5 logs, providing high sensitivity, accuracy, and speed, delivering results in just one hour. We believe this positions us well to grow our asset business, as this market is much larger than the protein sector, and all three segments—proteins, antibodies, and ELISA—are crucial for our success. Our focus remains on defending our position while also expanding in these areas.

And on the pricing side, I know you have been looking at your book of business there from a pricing perspective. Just curious what you're seeing, if any change. I think you've gotten a bit better from a competitive standpoint, if I recall correctly.

It was one of my big worries coming into this Company was that are we going to be really worried about price going forward with a strong portfolio of R&D systems brand. But we've not had any price impact. We have been able to increase prices on important new to the world, where we stand alone as the only premier reagent supplier. And, of course, we have to go to war in the low-end stuff and we have PrimeGene and other things to work with. The net of it all is our pricing is holding up, which I think is outstanding given the way these markets are.

Okay. On the biopharma side, that sector has shown strong performance. You are still in the earlier stages of your R&D process. Do you anticipate any potential weaknesses due to the current market volatility? Please continue.

We've had a dollar to give, and it's a really good story, especially since we've experienced three strong quarters in a row. There was a lot of discussion a couple of quarters ago about whether Germany was back, and it certainly is. Europe is really performing well and looks great. Overall, there’s nothing to be concerned about in that regard for now.

Okay, just one last question. You mentioned M&A and that ProteinSimple is starting to show improvement. From a timing standpoint, are you feeling confident about ProteinSimple at this stage to pursue opportunities if they come up, or do you think you need a bit more time?

It's a great question. We've done 6 acquisitions since I've been here. I would say 5 are pretty much integrated. I would say ProteinSimple's pretty much integrated. And in terms of ProteinSimple being on track, it really is three segments in ProteinSimple, and two are doing great. It's the Simple Western platform which is the biggest reason we bought it, of course. But that's the part that we're reengineering, and it's on track. The biologics is a great story. And with the new Maurice platform being launched, we expect high growth to continue in that area. And are we ready for more? Absolutely. We've always been ready for more, and we probably have never been more ready than now. We have spent a lot of time on this process and we have participated in some that were heartbreakers that got away, but it doesn't stop us. We were on a rigorous process. We were on a process that we have targets in parallel and deals will come when deals come. And one thing we will not do, though, is overpay. We will remain very disciplined. And our process never allows us to fall in love with anything that we shouldn't be falling in love with too early.

This is Dylan on for Matt. Two quick ones, could you guys quantify the OEM shipment that helped out the clinical controls in the quarter?

We don't provide that level of detail. However, the customers in question are primarily large pharmaceutical companies, and they fell short by just a few days last quarter. Whether they are significant or if they contribute to strong organic growth for this division, we still performed well even without them. It’s important to view this as a more annualized business at this point, as the two segments experience greater fluctuations due to long shelf life and bulk ordering. Overall, I believe the results will align with our expectations.

And then I'll go fishing with this one as well. Do you guys have a long term target to return to double-digit top-line organic growth? And if so, when could we expect that?

Achieving double-digit organic growth in a company of our size would be positive. We have consistently highlighted that the core of the company contributes significantly, though it currently shows mid-single-digit growth. Given the market dynamics and our strong position in proteins, we remain cautiously optimistic. Mid-single-digit growth is our ongoing expectation. We have long-term goals in place, and we are aiming for ProteinSimple and Simple Western to perform in a 20% growth segment. While CyVek may not reach the same scale as the ELISA platform, it represents a solid addition to our portfolio. This growth is entirely organic and stems from our start-up endeavors. Overall, we anticipate high single-digit growth. With ProteinSimple back on track, we believe we can reach that target. You can analyze our quarterly performance and deduce what it would look like without ProteinSimple, and you will find that we would be on course for the expectations discussed.