Bio-Techne TECH · USD

Note 13. Segment Information:The Company operates under two operating segments, Protein Sciences and Diagnostics and Spatial Biology.The Company’s Protein Sciences segment is comprised of the reagent solutions division and analytical solutions division. Our Protein Sciences segment is a leading developer and manufacturer of high-quality biological reagents used in all aspects of life science research, diagnostics and cell and gene therapy. This segment also includes proteomic analytical tools, both manual and automated, that offer researchers and pharmaceutical manufacturers efficient and streamlined options for automated western blot and multiplexed ELISA workflow. No customer in the Protein Sciences segment accounted for more than 10% of the segment’s net sales for fiscal 2025, 2024, and 2023.The Company’s Diagnostics and Spatial Biology segment is comprised of the diagnostics reagents division, spatial biology divsion, and molecular diagnostics division. Our Diagnostics and Spatial Biology segment develops and manufactures diagnostic products, including controls, calibrators, and diagnostic assays for the regulated diagnostics market, exosome-based molecular diagnostic assays, advanced tissue-based in-situ hybridization assays for spatial genomic and tissue biopsy analysis, and genetic and oncology kits for research and clinical applications. No customer in the Diagnostics and Spatial Biology segment accounted for more than 10% of the segment’s net sales for fiscal 2025, 2024, and 2023.There are no concentrations of business transacted with a particular customer or supplier or concentrations of revenue from a particular product or geographic area that would severely impact the Company in the near term.The Company discloses segment operating income as its measure of segment profit, reconciled to both total operating income and income before taxes. Business segment operating income excludes certain expenses and income that are not allocated to business segments (described below as unallocated amounts). Business segment disclosures consider information used by/provided to the Company’s chief operating decision maker (CODM). For the Company, the CODM is the Chief Executive Officer. The CODM uses segment operating income to allocate resources to segments in the planning and forecasting process along with periodic reviews of results and overall market activity.

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. 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 June 30, 2025 and 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.

Note 6. Debt and Other Financing Arrangements:On August 31, 2022, the Company entered into a revolving line-of-credit and term loan by a Credit Agreement (the Credit Agreement). The Credit Agreement provides for a revolving credit facility of $1 billion, which can be increased by an additional $400 million subject to certain conditions. Borrowings under the Credit Agreement may be used for working capital and expenditures of the Company and its subsidiaries, including financing permitted acquisitions. Borrowings under the Credit Agreement bear interest at a variable rate. The current outstanding debt is based on the one-month Secured Overnight Financing Rate (SOFR) plus an applicable margin. The applicable margin is determined from the total leverage ratio of the Company and updated on a quarterly basis. The annualized fee for any unused portion of the credit facility is currently 10 basis points. The Credit Agreement matures on August 31, 2027 and contains customary restrictive and financial covenants and customary events of default. As of June 30, 2025 and 2024, the outstanding balance under the Credit Agreement was $346.0 million and $319.0 million, respectively.

Note 12. Income Taxes:Income before income taxes was comprised of the following (in thousands):​​​​​​​​​​​​Year Ended June 30, ​ 2025 2024 2023Domestic​$ 86,814​$ 174,806​$ 288,458Foreign​ 11,649​ 10,883​ 50,201Earnings before income taxes​$ 98,463​$ 185,689​$ 338,659​The provision for income taxes consisted of the following (in thousands):​​​​​​​​​​​​Year Ended June 30, ​ 2025 2024 2023Taxes on income consist of:​​​​​​​​​Current tax provision: ​ ​ ​ Federal $ 54,589 $ 40,228 $ 59,810State ​ 10,402 ​ 4,853 ​ 12,753Foreign ​ 11,224 ​ 12,664 ​ 10,453Total current tax provision ​ 76,215 ​ 57,745 ​ 83,016Deferred tax provision: ​ ​ ​ Federal ​ (46,433) ​ (28,301) ​ (28,829)State ​ (4,303) ​ (4,563) ​ (2,414)Foreign ​ (416) ​ (7,297) ​ 1,444Total deferred tax provision ​ (51,152) ​ (40,161) ​ (29,799)Total income tax provision $ 25,063 $ 17,584 $ 53,217​The Company’s discrete tax benefits in fiscal 2025, 2024, and 2023 primarily related to share-based compensation excess tax benefits of $4.5 million, $18.4 million, and $12.3 million, respectively. The following is a reconciliation of the federal tax calculated at the statutory rate to the actual income taxes provided:​​​​​​​​​​​​ Year Ended June 30, ​ 2025 2024 2023​​​​​​​​​​​​Income tax expense at federal statutory rate​​ 21.0% 21.0% 21.0%State income taxes, net of federal benefit​​ 2.2​ (0.2)​ 2.5​Research and development tax credit​​ (3.3)​ (2.2)​ (1.3)​Foreign tax rate differences​​ 6.2​ 3.1​ (0.6)​Option exercises​​ (3.9)​ (8.8)​ (3.3)​U.S. taxation of foreign earnings​​ 0.4​ 0.1​ 0.4​Foreign derived intangible income​​ (12.0)​ (4.8)​ (3.4)​Foreign withholding tax​​ 0.1​​ (1.2)​​ 1.5​Executive compensation limitations(1)​​ 12.5​ 2.7​ 0.8​Changes in unrecognized tax benefits​​ (2.5)​​ —​​ —​Valuation allowance​​ 17.4​​ —​​ —​Outside basis difference​​ (12.9)​​ —​​ —​Other, net​​ 0.2​ (0.2)​ (1.9)​Effective tax rate​​ 25.5% 9.5% 15.7%(1)This includes the impact of the non-deductible portion of a non-recurring arbitration award of 7.9%.

Note 10. Share-based Compensation and Other Benefit Plans:The cost of employee services received in exchange for the award of equity instruments is based on the fair value of the award at the date of grant. Compensation cost is recognized using a straight-line method over the vesting period and is net of estimated forfeitures. Stock option exercises and stock awards are satisfied through the issuance of new shares.Equity incentive plan: The 2020 Equity Incentive Plan, which replaced the Company’s Second Amended and Restated 2010 Equity Incentive Plan (collectively, the Plans), provides for the granting of incentive and nonqualified stock options, restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights. There were 36.2 million shares of common stock authorized for grant under the Plans. The maximum aggregate number of shares of common stock reserved and available for awards under the 2020 Equity Incentive Plan is 9,936,808 shares. At June 30, 2025, there were 6.8 million shares of common stock available for grant under the 2020 Equity Incentive Plan. The maximum term of incentive options granted under the 2020 Equity Incentive Plan is ten years. The Plans are administered by the Board of Directors and its Executive Compensation Committee, which determine the persons who are to receive awards under the Plans, the number of shares subject to each award and the term and exercise price of each award. The number of shares of common stock subject to outstanding awards as of June 30, 2025 under the Plans were 9.5 million.The fair values of options granted under the Plans were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used:​​​​​​​​​​​Year Ended June 30, ​​ 2025​2024​2023​Dividend yield​0.45%0.41%0.34%Expected volatility​32-36%30-37%30-36%Risk-free interest rates​3.5-4.4%3.8-4.8%2.8-4.4%Expected lives (years)​4.6​4.4​4.7​​The dividend yield is based on the Company’s historical annual cash dividend divided by the market value of the Company’s common stock. The expected annualized volatility is based on the Company’s historical stock price over a period equivalent to the expected life of the option granted. The risk-free interest rate is based on U.S. Treasury constant maturity interest rates with a term consistent with the expected life of the options granted.

Note 7. Leases:As a lessee, the Company leases offices, labs, and manufacturing facilities, as well as vehicles, copiers, and other equipment. The Company determines whether a contract is a lease or contains a lease at inception date. Upon commencement date, operating lease right-of-use assets and liabilities are recognized based on the present value of lease payments over the lease term. The discount rate used to calculate present value is the Company’s incremental borrowing rate or, if available, the rate implicit in the lease. The Company determines the incremental borrowing rate for each lease based primarily on its lease term and the economic environment of the applicable country or region. The Company recognizes operating lease expense on a straight-line basis over the lease term. Further, as part of our adoption of ASC 842, the Company also made the accounting policy elections to not capitalize short term leases (defined as a lease with a lease term that is less than 12 months) and to combine lease and non-lease components for all asset classes in determining the lease payments.The Consolidated Financial Statements include the following amounts related to operating leases where the Company is the lessee ($ in thousands):​​​​​​​​​​​​​​​Year ended ​​​June 30, ​​​​​2025​​2024​​2023​Consolidated Statements of Earnings​​​​​​​​​​​Fixed operating lease expense​​$ 17,414​$ 18,195​$ 15,941​Variable operating lease expense​​​ 5,426​​ 4,988​​ 4,437​Total operating lease expense​​$ 22,840​$ 23,183​$ 20,378​​​​​​​​​​​​​Consolidated Statements of Cash Flows​​​​​​​​​​​Cash paid for amounts included in the measurement of operating lease liabilities​​$ 16,320​$ 17,729​$ 14,934​ROU assets obtained in exchange for operating lease obligations​​​ 8,767​​ 11,051​​ 48,103​​​​​​​​​​​​​Consolidated Balance Sheets​​​​​​​​​​​Lease Assets and LiabilitiesBalance Sheet Classification​​​​​​​​​​Operating lease ROU assetsRight-of-use asset​$ 73,399​$ 91,285​​​​​​​​​​​​​​​​Operating lease liabilities - currentOperating lease liabilities - current​$ 14,098​$ 12,920​​​​Operating lease liabilities - long-termOperating lease liabilities​​ 83,960​​ 87,618​​​​Total operating lease liabilities​​$ 98,058​$ 100,538​​​​​​​​​​​​​​​​Weighted average remaining lease term:​​​7.6 years​​8.5 years​​​​Weighted average discount rate:​​​ 4.3%​ 4.

Note 4. Acquisitions:We periodically complete business combinations that align with our business strategy. Acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date and that the results of operations of each acquired business be included in our Consolidated Statements of Comprehensive Income from their respective dates of acquisitions. Acquisition costs are recorded in Selling, general and administrative expenses as incurred.Fiscal year 2025 Acquisitions ​There were no acquisitions in 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 2024. ​The allocation of purchase price consideration related to Lunaphore was completed in the fourth quarter of fiscal 2024. Net sales and operating loss of this business included in the Company's consolidated results of operations for fiscal 2024 were approximately $14.3 million and $24.0 million, respectively.

Cybersecurity Risk Management and Strategy Bio-Techne’s cybersecurity strategy is to maintain and fortify a secure, actively-monitored environment for our internal and our customers’ data while supporting our and our customers’ business needs. Our cybersecurity program follows industry standards and best practice for preventing, detecting, remediating, and mitigating potential cybersecurity threats, including regular processes to identify, evaluate and manage potential risks.​Our IT Security Operations team administers and monitors the prevention, detection, mitigation, and remediation of potential cybersecurity risks. This team leverages both Bio-Techne’s internal IT resources, including its personnel, as well as managed security service providers and other third-party security software and technology services, as well as through other means. We also have implemented processes and technologies for network monitoring and data loss prevention procedures.​We conduct periodic risk assessments, including with support from external vendors, to assess our cyber program, identify areas of enhancement, and develop strategies for the mitigation of cyber risks. We also conduct regular security testing and have established a vulnerability management process supported by security testing, for the treatment of identified security risks based on severity, including risks arising from our use of third-party providers software and service providers. In addition to our evolving processes and systems, we foster a culture of cybersecurity education, training, and testing. Every year, employees must take and pass rigorous information security and protection training. ​We partner with experienced external consultants to assess our cybersecurity program, and to perform penetration testing as well as other testing programs designed to identify vulnerabilities and areas for fortification. Also, as part of our cybersecurity risk management program we maintain cyber insurance, with coverage amounts and terms that are typical and appropriate for a company of our size and type. This insurance may not be sufficient to cover us against all types of claims related to security breaches, cyberattacks and other related breaches.