Welcome, everybody, to day one of the UBS Healthcare Conference. I'm Dan Leonard, the Life Science Tools, Diagnostics, and Services Analyst at UBS. We're lucky to have with us today from Bio-Techne, Kim Kelderman, CEO, and Jim Hippel, CFO. Welcome, both of you. Thank you, Dan. Thank you, Dan. Thanks for having us at this wonderful conference. So we're coming off of earnings season here. I thought we'd kick things off with the highlights from your Q1 earnings call. Yeah, thanks. Highlights and lowlights. I'll be transparent. The quarter rolled in pretty much within a range of our expectations. Jim had very nicely rolled out our view on how the fiscal year would unfold during Q1, right? Earnings call at the beginning of the year, and yeah, we had mentioned that our first quarter would be very similar to our fourth quarter. The good thing, though, is that, as anticipated, we saw a little bit of strength in specifically the biopharma markets and markets towards the end of the quarter, first quarter. And so we exited strong with a 4% growth, $289.5 million in revenue, and nice double-digit growth in the diagnostic segment, and then in the black, 1% growth for the protein sciences segment. We were very encouraged by, A, the performance of our team and how we delivered the quarter, and B, by the traction in the core, and then C, by the optimization efforts that we had rolled out over the last couple of quarters, increasing our supply chain and internal efficiencies. That translated nicely in a very strong bottom line, I should say, stronger than anticipated bottom line. That made for a real nice quarter. Sounds like only highlights to me. Did you mention there were some lowlights you wanted to flag as well? Yeah, I started time ticking, so I got nervous. Good one. The integrated into my answer was, like, we saw the core ticking up a little bit, some momentum, right? And that means that the core has been a laggard, and that's a big portion of our company, right? It fortunately is getting smaller. It used to be 70/30, 70% of the revenues coming out of the core and 30% out of our new growth verticals. But by now, it's 55/45. And therefore, we feel we are a little less dependent on just general purpose reagents and have been able to deliver differentiated growth because of those growth verticals and the proportion of them being bigger. But overall, the total life science general purpose reagents have been underperforming, right? And in addition to that, very similar with the instrumentation portion of our business. Now, instrumentation is 10% of our revenues. Those have been under pressure as well. And everybody knows the reasons. China's stimulus, China's activity level, as well as biopharma activity levels, funding levels have been suppressed over the last year and a half. And those are obviously the product lines that are struggling. But switching back to the highlights, the instrumentation in pockets went back into the black, as well as some of the core reagents coming back into the black was good to see at the end of our Q1. Okay. And I want to touch on, or spend a lot of time on the growth drivers. But before we do, let's talk about the core for a moment. You did mention that it's lower proportionally of your total revenue mix. It's still a large proportion of your total revenue. What gets that to turn more meaningfully positive? It's the overall activity level, right? So right now, we see funding from, and by the way, the pieces you put out with the data have been very, very helpful for the overall market to understand what's going on, right? Thank you for reading. Yeah. Very well done. And it reflects the truth, and it reflects what we are seeing. Obviously, pharma/bio-pharma, we see increased funding levels, certainly over last year. But we look more at how is it compared to 2019, the pre-pandemic level. And currently, we're still looking at an increase of 30%-40% year over year, and 30% over 2019. And those funding levels are healthy. It's even more pronounced in the cell and gene therapy specific funding, right? So there are also big step-ups, which is good, and that will definitely make all boats float a little higher. Where the funding is going, though, is typically in the programs that are a little bit further along. So that means tinkering around with general purpose reagents and trying to find out which antibody you order from different companies, different things to kind of do your general research. That is not really where the funding ended. Eventually, that will be funded again as well. But for the general purpose reagents, that needs funding specifically. Now, we have fortunately products that go along the whole life cycle of a program, and it's clearly the phase one, two, three, the clinical products, as well as the commercial programs that have been carrying our results. I get questions from time to time on the core general purpose reagent part of your business in terms of the competitive environment, whether that has changed at all, given that there have been some large transactions of competitors. Have you noticed any change in the competitive environment from your perspective? Not really. Obviously, it's a very fragmented market, right? So there's hundreds of thousands of antibodies and proteins, and there are tens of players. And then even if you look at your microchart, there's still a big block of other, which are tiny players. So it's a fragmented market. We have always wanted to differentiate in having the highest quality, best characterized antibodies and proteins. So high quality, reproducible, so you can get similar results. And that's been a little bit of our forte. A couple of things that we found were important are other trends, like are some of your solutions automatable? So that's why we have the ProteinSimple franchise to make sure that we have automated solutions for usage of these reagents. And then we always wanted to make sure that if a customer goes from discovery into the clinicals all the way to a treatment or a diagnostic, that our reagents can also clear the regulatory hurdles. And that's why you've seen us over the last couple of years investing, but also achieving GMP certifications of different proteins, et cetera. Now, another differentiator that we are really using right now, and you saw the press release, is that it's a little bit of a hype word, but in our case, AI has really helped coming up with some designer proteins. And we will launch our first designer antibody this quarter. And it's interesting because those are patentable reagents, and they have the best of both worlds. So we optimize bioactivity with stability, heat resistance, all kinds of different characteristics that we can now combine through the large language models. Yeah, again, if that's patentable and they are outperforming many of the natural proteins, then that is a differentiator for us to our competition as well. Overall, competitive landscapes stay pretty much the same, even though a couple of years ago, there were some larger transactions. We have been competing with those entities, and we will continue to compete specifically on these three, four elements. Okay. I checked in my list. I didn't have AI on it, but you brought it up. Yes. How does that help me better understand how that influences the competitive environment? Because yours is a business, at least in the core reagents market, it's never really been reliant on hard intellectual property. It's mostly been soft IP, experience, those kinds of things. So how does the calculus change when you start pumping out patent-protected antibodies and proteins? Yeah, I think it's a competitive advantage. Well, first of all, the tool as such, the AI tools are newer and have been rolling out over the last couple of years. We knew that once companies say, "Hey, we've been in this market for 37 years, and we are the quality standard, and we have 300,000 of this and 6,000 proteins," that sounds good, but that is not really a competitive advantage up until you do something with that. And we started sequencing our antibodies and characterizing the proteins and then generate this data to educate the AI models, right? Because AI can only do something smart if you put good data in. The moment you have no data or garbage data, you get suboptimal results. The one thing that we did have compared to many of our competitors is decades of great antibodies and proteins that you can characterize and then feed into the AI model. So we feel we have a competitive advantage there. And obviously, we just don't crank out a random protein. We picked IL-2 with heat stability, which is just amazing. And it's a true solution for where there was a gap because sometimes you want your temperature to be up for selectivity, but then the protein falls apart. So we really solved for a problem utilizing AI. And we were thinking that more or less nine proteins a year out of our portfolio will become a GMP version. And the same for AI. Nine or so a year will get optimized through an AI and get an AI version that is obviously substantially different, higher performing than the natural one. Okay. So, would you put that on par to your GMP opportunity? I wouldn't go as far as to put it on par, but it will be a lever we have to keep our very important and large core highly competitive in the future and highly profitable. Yeah, we really have to look at the traction, and interesting is that the peak revenues are typically very high on those ingredients, but the uptake, it's hard to predict uptake. So we just launched one or two a couple of weeks ago. We'll see and learn. So in the upcoming conferences, you should ask that again. Personally, I think it's just a real differentiator that will bring solutions for people, will bring customers to you as a provider, and you have a real opportunity to cross-sell. So I think it's hard to quantify it itself, but I think it's just a rejuvenation of our whole portfolio. There is a couple of comments you made in the discussion that I want to circle back to. One was around automating your core reagents business. And I think that was part of the strategy for the ProteinSimple acquisition to begin with. So with that as a segue, can you bring us current on ProteinSimple, how you frame the market opportunity, how you frame your current penetration, and some of the efforts you're doing to gain more wallet through ProteinSimple? Yeah. We're really happy with the performance of the unit. We have optimized internally footprint, centers of excellence, et cetera, and we are also very happy with the future, not only the need to automate in end markets, but also some of our new product introductions, and we will talk about a little bit more later. Overall, we think this automated opportunity of some of these clunky manual processes historically is a great opportunity for us. We think the addressable market is around $3 billion. We have more or less 10% penetration in there. We continue to see great traction in automated solutions. We feel automation is a megatrend. Labor has not gone cheaper, quite the opposite. Secondly, the consistency of your results and generating your results fast and maybe overnight, and you'll get them the next day, it will continue to be a value proposition. So that is overall a driver for the franchise. And as you know, we have several product lines in there. And we feel that each and every one of those have a very promising trajectory in front of them. I would say that the data supports the thesis that Kim just laid out because throughout this post-COVID downturn in the market that we've seen, our consumables that are specific to those instruments have continued to grow enough to actually carry the whole franchise into positive growth territory throughout the entire last couple of years. It basically proves out to us that when budgets are tight and productivity is even more important, they see those ProteinSimple instruments as a high-value productivity tool. They use those instruments like crazy right now. Okay. Trying to think about some of the platforms, specifically Simple Western, for example, when I think about the Western Blot being the target market for that, there are some applications of Western Blot, which are akin to the hammer at the construction site. They're not super fancy. Everyone uses it. And I often wonder how much of the market is that? Is that really convertible? What are your views on that? I think it's a very good observation. Western Blot used to be, as I mentioned, a clunky process, but everybody kind of has it as a must-have in your laboratories. The ability to automate it and make it consistent and quantifiable results was just a game changer. So we feel, again, it's almost a $1 billion opportunity. We do see now that we're in academics. In the past, it was kind of like we don't want to automate it because students need to learn how to do a Western Blot. But now in a new age, it's kind of like you don't have to learn how to handwrite anymore because you can just put it in the computer. It's the same now. In academics, the Western Blot also sees uptake. And we can skip how to do Western Blot, but also your results are going to be more consistent. So we find traction in academics where we originally didn't have immediate traction, but in pharma/bio-pharma, there was always traction because, again, fewer hands in the lab, but also more consistent results. We have invested significantly in a huge program to launch a new Western Blot automated solution, which is called Leo. You might have seen us on different trade shows, but also online to promote the Leo. It's going to be a very flexible automated solution, Western Blot. You can run anywhere between 25 to 100 samples, eight targets per sample, and then it has a price point of $270 or so. It's a little bit more expensive than the traditional boxes in our lineup, but it's extremely aligned with what customers have been wanting for over the last couple of years. It's interesting that some customers even come back to Western Blot and moved away from it because it's so messy and clunky. But with our automated solution, it's kind of like, "Hey, we can come back and put some volume on the process." And for that, we need a higher volume machine. And for that, we have kind of designed and will release Leo in the coming quarters. And because of the strong quantitative data you get out of it and repeatable data you get out of it also versus a traditional Western Blot, the use case continues to expand. So not only are people who are customers who abandoned Western Blot years before coming back to it, but we continue to find new applications. Both our internal people, but also our own customers share with us new applications. So for example, in gene therapy, it's one of the fastest growing kind of end markets right now for Simple Western application. Okay. Another segue, you talked about the journey from RUO reagents to GMP reagents. And with that, I wanted to talk a bit about cell therapy and better understand the unit model there and the opportunity for Bio-Techne. I know you target that market in a few different ways, as you just mentioned, Jim. Simple Western targets that market. Your GMP proteins target. You have an investment in a company that you plan to acquire. But if I could try to distill it simply, how do I understand the dollar opportunity or wallet opportunity that would flow to you from $500,000 cell therapy? What goes to Bio-Techne in that circumstance? Yeah. So there's obviously to get to your therapy, we have our spatial solutions and our three platforms help you to get to the right therapy. But you're asking once you have that therapy of about $500,000, what is your portion? Well, the interesting part of it is highly likely the pricing dynamics will not stay the same, and there will be price pressure on these therapies, which is fine with us because bottom line, we are more or less adding $15,000 or so per treatment in value. And you can break it out in more or less even parts. One is if you would do your self-therapy, you would need a G-Rex. Some therapies need several G-Rexs, but let's assume you need one. That'd be about one-third of that price, which is this patented bioreactor that differentiates in that it has a permeable bottom, so your cells sit in there and then oxygen can get in there. There are different entry ports where you then put different reagents in there, proteins and cytokines, et cetera. We have proteins and cytokines. Those would go into this container. That would be another one-third of the value. And then last but not least, you have media to make the cells grow. And that would be the last third. So the interesting thing is you would say, "Listen, that's only $15,000 per treatment." But the good thing about that is that if there's price on the treatment, price pressure on the treatment, I mean, we truly bring real value fully integrated into a treatment, meaning it's essential to get a result. It's not a corner where people have to go shave off $500, right? That's why we kind of like the position we're in and the price point we're in. Just to clarify, so I understand the G-Rex. I understand your protein and cytokine opportunity. Do you sell media into that workflow as well? I thought there was some media asset that you were divesting. Yes. Very good memory. That's a Fetal Bovine Serum, right? And that is not specifically for cell and gene therapy. And that is a commodity with very low margins and not really in our core or in any of our vertical growth verticals. So that's why we divested it. Okay, so unrelated. It would not be used in cell growth therapy or would not be in a G-Rex. Unrelated. Okay. But you do manufacture media that would be used in a G-Rex? Yes. Okay. That's different from fetal bovine. There's also small molecules also, which is a piece of that extra. We have GMP small molecules that are also part of the formula that make up that extra third that Kim was talking about. Okay. From the Tocris business, is that right? Right. Got it. And that's helpful. And helpful. And $15,000 to me sounds like a large amount per therapy, not a small amount. So. Good. Well, we've been to $500,000. We've been to 500,000. Yeah. Let's talk a bit about spatial biology. You have a couple of different business units that you've gained through acquisition. I guess for starters, and we'll dive into the growth drivers, but how are you currently organizing the spatial biology business internally? Yeah. We're very proud of our spatial biology business. We were always very focused and vested in it because we believe that there are many applications where you want to see in a tissue what happens where. And that theory is holding true. We had the ACD acquisition seven years ago, which had all the RNA probes and RNA detection. We wanted an automation solution. So a little over a year, we bought Lunaphore with a very competitive instrument. And at the end of the day, you want to put those together. So yes, it's one business unit in the diagnostics and spatial segment with one leader. But then again, a reagent is very different than an instrument. So we do have an instrument engineering, an instrument design group, and the same for the reagents, but under one leader. Of course, the commercial team has their specialties just as well, but they do visit the same customers. So they're very interested and incentivized to cross-sell and work together to bring the best experience to the customers. Okay. And how do you frame that opportunity when you think about the research market as opposed to the diagnostic opportunity? I think our spatial footprint right now is similar. Also one-third, one-third, one-third. Well, let's be precise. 40% of it goes into academic end markets. 30% or so goes into the translational markets. And then 30% goes directly into clinical-related businesses, so CROs and/or hospital laboratories and/or reference laboratories. That's kind of like the breakout. Nicely, evenly distributed. But do you need some type of FDA-approved diagnostic application to really accelerate that market? Yeah. The clinical market? Yeah. Fortunately, there are obviously research hospitals, et cetera, where research is happening and the results are known to be related to patients. More importantly, is that America and many other countries have LDT solutions where you use common reagents that are not FDA-approved in an LDT lab-developed test, right, which then creates a result for the customer and for the patient. But that is currently our biggest stream. But we do have a couple of approved solutions. And specifically in Europe, we launched an IVDR related to HPV, right? And so we'll continue to tippy-toe into the direct-to-consumer fully approved solutions. But our biggest portion right now is in the LDT space. Okay. And how much does the multi-omic capability of the Lunaphore instrument, the Comet, impact the opportunity there as well? I think that was a recent launch on the Comet. Right. After purchasing Lunaphore, one of the first things was to make sure that our ACD, the RNA-based detection, works on the instrument. The nice thing about this instrument, the Comet, is that it can process and use its open system. It can use the antibodies people were already using, right? In the meantime, we want to make sure that we utilize the opportunity to also create our own pull-through. Over the last quarter, we have validated 25 of our core antibodies to also work on the Lunaphore instrument. If you think about the Lunaphore instrument, COMET, it will pull through its own little microfluidic chip. That's more or less $45,000 per instrument per year per customer. Then it will pull through, we don't know exact numbers yet, but it will pull through the RNAscope opportunity. It can and will pull through our R&D Systems antibodies, which we will continue to validate for the solution. That in total would double the $45,000. We are anticipating about $90,000 or so per instrument per customer per year of pull-through on the instrument once we have got all the streams aligned. Okay, well, I want to make sure we touch on your thoughts on liquid biopsy before I run off the clock. Can you offer an update on your strategy and how you're framing the forward opportunity for your liquid biopsy offering? Yeah. Liquid biopsy is basically a combination of the assets we bought, which was Exosome Diagnostics, right? And it's about seven years ago. And Asuragen, which is more or less three years ago. And Asuragen, well known for diagnostic kits and selling into laboratories. And ExoDx, well known because it looks at exosomes as their biological target, which have high-quality information. And therefore, you would achieve higher sensitivity and specificity. So those are the two assets we bought. Both of them individually doing really well right now. As you've seen over the last couple of quarters, that last year, EPI had a breakthrough year. EPI is the prostate test, the one test on market for Exosome Diagnostics. Last year, it grew about 70%. Right now, it's in the ballpark of 40% growth, which is obviously we're very content with that. And then the Asuragen sits in the 30%- 40%. Last quarter was about 40% growth, so they're both growing really well, so that's nice as stand-alones. But why we put those assets together is really what we are most enthusiastic about, that if we would create kits that you can distribute globally to laboratories based on interrogating exosomes, and that was really the vision. In the coming months, we will launch the first child of those two parents, which in the form of an ESR1 test. ESR1 is a breast cancer treatment resistance marker, and patients will have to usually get monitored once they're on the treatment if resistance is building. If you find the right moment where that happens, you double the life expectancy of a patient, so it's a very important point in time, and therefore, we are launching this test. It's a kitted test. We sell it to laboratories. It interrogates the ESR1 part. It's on a qPCR instrument, right? And there's plenty of qPCR capacity in the market. And it's a very important test that you would need to do frequently. So we're enthusiastic about helping physicians treating and combating this terrible disease. Okay. I wanted to shift a bit to margins. Jim, there's a number of puts and takes that impact the margin line in 2025, which I heard on the call, and I understand those. But beyond 2025, what does the margin algorithm at Bio-Techne look like? And what drives margin expansion at the company? By far, the biggest driver of margin expansion is growth of our highly profitable product lines. Our core reagents have 90% plus contribution margin, but even our instrumentation has margins that are well in the 70%. So when you saw during we were double-digit growth, even pre-COVID and right around the COVID timeframe, we had some pretty and we were investing quite heavily in growth. And even with those heavy investments, we were still able to produce very nice margin expansions year over year. So that is by far the biggest lever we have is getting back to growth. But in the meantime, of course, we're positioning the company to make sure that we take the most advantage of that leverage once the markets do come back. Like many in our industry, we've been right-sizing certain areas of our company for the current environment from a headcount perspective. We've also been rationalizing locations, inventory locations, centers of excellence like Kim talked about, to position us for better for growth in the future, and then also, we touched on this, but really doing a hard look at our certain nascent product lines we have that don't contribute much to the top line growth nor the bottom line margin, but probably take more than they should away from our attention as a management team and our employees, and so we're working to that as well, so a combination of those three things are setting a real nice foundation for even greater leverage once the market returns and the growth returns. Okay. Final question, M&A. How important is M&A to the growth algorithm at Bio-Techne, and what is the outlook there? It's still obviously our main tool and target for capital deployment. But we want to be disciplined. We have a real good team that is continuously screening opportunities. The nice position we are in is that, let's say, five, six years ago, we still had to buy certain assets to build out these growth verticals, right? Missing instrumentation, while you have the reagents, it's a big gap. So you have to acquire. The nice position we're in is that we basically have the essential ingredients. So we don't have to. Now, that doesn't mean that therefore we're going to take it easy. It means that we can be more selective, and we have very specific opportunities that we follow very closely. We do know that there are still things that we would love to add to our cytokine therapy portfolio. Building out with some very innovative technologies, they're the core. There are companies that are doing real cool stuff in core businesses, and we wouldn't mind adding those to our portfolio. As I mentioned, discipline means we don't feel the urge to overpay, and/or we don't feel the urge to buy a suboptimal asset. The machine is ready, and we have the gunpowder. It's just about being disciplined. Okay. Well, we'll leave it there. Jim, thank you both for your time. Thank you, Jim. Thank you, Kelderman. Thanks, Kim. Great job.