Earnings call transcript Q4 2023

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Operator

Good day. And welcome to the Neogen Corporation Fourth Quarter Fiscal Year 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]

is event this note, being recorded. Please now Bill Waelke, would like to to over conference the Head turn I of Relations. Investor ahead. go Please

Bill Waelke

Thank Naemura. passing fourth who by this the us cover John the fiscal you Adent, the forward-looking briefly over for of language our to and discussion CEO, before year. morning I’ll followed results call of CFO, will quarter for the be non-GAAP Dave our the XXXX of joining our

our published in fourth results, the section market we Before with available today, as well documents of presentation the quarter the opened as Relations our both website. Investor

measures On measures included release earnings the we that morning, evaluating in will presentation. financial are and believe certain financial useful in non-GAAP of our are call we Reconciliations our our refer this performance. to non-GAAP historical

among risks two the Reform Slide statements or include, These are statements. forward-looking the forward-looking and annual any to that other which Securities on reminder different XX-K results Litigation from such Private to expressed matters a could of will statements in Act. that those our include remarks in to forward-looking most be statements. provides These update report that meaning Form forward-looking cause risks have SEC. recent make we We implied with filings in our we disclaim materially by the actual these of described within subject obligation others,

John. to With over that, turn I’ll things

John Adent

And welcome our morning, our everyone. of XXXX the Bill. Thanks, quarter call year. Good to earnings covering fiscal fourth

thoughts on fiscal on today provide update initial performance be our and year. to you our XXXX We’re to with pleased the an

a our despite continued they many food core conditions. softening tests affected solid growth the on lower a year-over-year performance have quarter In delivered in basis, which Food in negatively both of the experience producers has volumes with volume of use. segments unit We Safety, to large market the

distribution the online and While in impact of our uncertainty end-user cyclicality the result of saw some we level Safety Animal the of production channel, in demand markets. which supportive destocking macro segment, normal remains was and broadly

a core against double-digit Animal business in faced of also Our prior Safety QX difficult year. the comparison growth

XM levels future former transition contributing growth significant our third a manufacturing saw higher production to in phone quarter the the and Food division, with at solid past improvement partner, In reduction Safety a due orders. we core in

with are We reporting rhythm structure are key we presence a our significant the in dividends operating the with expanded and optimistic into and providing steadier decisions. that settling paying us on-site inputs elevated

certainly we of position. improving production transition are has a recent Petrifilm its innovation further leading line to While the also focus, levels prioritizing product been on continued market the flagship capitalize

An Plate accuracy. example Reader area our and in enumerates AI X XX seconds this to Petrifilm utilizing improve Petrifilm efforts the speed team’s is different plates which less, in Advanced, or of

I XXXX, in reasons. two launched product it this Although now mentioned for

awarded just Dot world’s was Product one Red competitions. in it the prestigious of the Award largest First, for month Design last design

Neogen, innovation that same that Second, product emphasis line. in the of an team placing this greater Reader even is we part where believe now on Plate we’re developed

significant potential we is well market has growth, also additional pharmaceuticals. core actively labs is This us future. but Safety Petrifilm Food share for next-generation markets and markets, the commercial team growth initiatives adjacent yet working will capture in and near indicator only leader clear on not market like testing, to into that allow development the in in believe drive

the completely at closing sample will the and end integration product operation four the relocation by the pathogen to well. lines of management our third and progressing manufacturing accelerated to quarter. of expect fiscal conveyed that Of handling integrated XM was lines. main The facilities hygiene monitoring we’ve us agreement, three the are be former transition activities Neogen into business, we product In in addition the

by agreements planning the end back also are of transition office functions the of the distribution third exit and We to services. those fully covering quarter, two

our focus numerous losing Despite finding we are customers we to needs. work integration underway, not have streams the new and their ways on meet

We providing results, keep quantitative food and our consumers qualitative assays are safe. fast in toxin to help natural Reveal both testing the with producers leader

our we Recently, and grains grain for portfolio Reveal to animal and fish have as Aflatoxin include byproducts. further as dry expanded for DON in histamine assays quantitative proteins, well and in

beef we systems testing animal provider In our to our growth bioinformatic include market are of cattle. genomics business, the Igenity we broadened for where leading on services, dairy high the

a beef percentages to managing Igenity free for by crops use their test dairy with genomic improve marketing, for animal BeefxDairy to their calves profitability feeding [ph] animals. producers performance to simple and efficiently is genetics traits from identify and

benefits of feed, of improve customers, and our of and genomic reducing use land. water more including use and tests our environmental the of consumption reduced for efficient of quality All antibiotics efficiency

the Our future. comprehensive continued on expansion the planning product factor the and portfolio in in chain portfolio quality is food help a marketplace are we of the differentiating to protect

the great excited opportunities in new combined business our of the I’m year. the us about position. to fiscal making fully leadership forward remain progress of looking and future We’re market this ahead and

to the more the results our to With for going over into I’m quarter. call turn insights that, some Dave for

Dave Naemura

John, you, Jumping welcome this everyone Thank the and morning. to into listening results.

which the compared to X% growth, acquisitions quarter foreign to both ago. quarter same the year. year an Acquisitions fourth compared were while was currency X% added of of prior revenues quarter. $XXX the Our increase the million, excludes headwind was a impact XX%, and foreign a for currency Core XX%

in of grew million revenues Food of business. in Media our X.X%. a core Culture in food single digits analysis year, high At with in prior Megazyme in compared segment products XXX% nutritional quarter, the $XXX Safety quality and on the Sales Other basis core to the growth increase strong an category our were our segment level, & including growth

business. solid XM former Within transitioned was Bacterial testing partially some sales & products, sanitation our general in of and to General products of by of Soleris testing Sanitation, offset microbiological lines lower growth pathogen product which the

Safety of our drug larger discontinuation the of due Natural line dairy markets. kits had revenue international for Food product our out Allergens decline product slight testing and to Toxins core categories, Rounding a

new fourth last vet the year’s on up led core Quarterly segment revenues instruments basis. Safety strongest $XX growth, had our core over quarter in Animal disposables were and of the a modestly animal Sales million, business of of line by lower and at category. volumes vitamin injectables Other customer. supplements small offset growth large the a Care partially This retail product a was by & in Animal

as of basis, by in insecticide solid year. the by Within the our up cleaners testing. disinfectants Worldwide versus growth mainly growth animal prior core on markets, offset as genomics in companion international in orders to mid-single revenue volumes solid led biosecurity portfolio, rodenticides and was lower timing a and was due well digits beef

are by which the progress transition division a revenue to production. believe orders. Petrifilm significantly grew a Safety pro for for double a business, of Neogen core Food digits The XM a digits a reduction was former we on with Petrifilm, on almost performance with included our The X% former levels growth good basis. past core improved arrangement sustainable basis. growth whole pro led of was and higher mid-single low as in of backlog due growth and forma on manufacturing of made We’ve path Including the XM forma

year points well in as the position. fourth was margin transaction, cost XX.X%, primarily of by increase addition from Food positive quarter as ago, a the driven margin representing same XM Safety with basis the business quarter a Gross XX.X% XXX the increase of price in the in an higher

points. than was basis the growth increase quarter, with year-over-year added $XX former the Adjusted division. EBITDA driven The year gross a XM the margin prior costs of business. driven which to offset XX.X%, EBITDA of the in representing the merger more XXX of Safety accommodate combined larger quarter was scale by million, XX% was Adjusted the expansion, by Food from margin increase

was the by earnings expense, share million higher was of and the $X.XX, quarter, with the in than for The interest adjusted was respectively, increase prior increase share adjusted more the in EBITDA, driven income year net $X.XX, outstanding Safety compared in $XX shares offset per million average earnings Food from net Adjusted adjusted period. per transaction. adjusted impacted in the $XX which to weighted by while income increase

debt in quarter for by which capital X.X of basis. pro at times position ratio improvements million, a the net on cash a with quarter XX% the $XXX in ended fourth fixed a of forma part a We total leverage working of driven gross million, rate and is of $XXX

million As forma of the pro market we look $XXX to million. year. million year $XXX outlook fiscal the full reflects and a This fiscal half compares challenging continuing fiscal conditions to $XXX between XXXX, through revenue we first on expect revenue basis XXXX end and

into services growth. transition With that enable third respect go-to-market a $XXX XXXX expected commercial to office well the million, range range quarter, expect pro adjusted fiscal investment the account compares exit arrangements million to of a of for year $XXX on some of This $XXX takes distribution full the in the which million incremental end as to basis. to EBITDA, initiatives forma operating planned and drive future as back in expenses we

which relates basis lowest compared it margin the XX.X% pro anticipate adjusted and the quarter EBITDA the revenue basis. the we to represent to first forma year As would margin on the lowest XXX prior year also expansion, seeing a specifically, over still the growth of of points core year, of

quarter year followed the the We with expect and third being quarter to by quarter shape lowest, highest. our quarter to fourth typical the being the apply second the the of seasonal dollars, first revenue the than

Safety integration amount, million to of ongoing anticipate is year total this million largest business. The $XXX will spending Food of be growth and XXXX, to maintenance expected we the a be approximately $XX which would approximately the Of normal of related CapEx CapEx. for capital fiscal have total

our goods the growth approximately XM to expect fully outflows the Additionally, allow the services, investments mostly, for for on sheet. be investment a of also $XX exit of year, onto balance the year side in working finished as These operations. in distribution by and business from to we capital the one-time but inventory bring EBITDA should funded prepare the million significant to if not performance, anticipate agreement we cash we that are legacy improved transition particularly inventory these

around tax we quarterly adjusted interest With $XX net respect XX% expense to income, rate an and million. anticipate approximately of effective of

call back the hand to closing now for John some thoughts. I’ll

John Adent

continue. Thanks, is markets. both resilience historical the solutions segments current in to being we we Food the great fully believe end a Two Despite of serve Animal trend leading provider and Neogen that Dave. Safety soft, expect conditions Safety.

made lines, an markets, into focus focused where driving By end I’m Neogen. with be XM we’ll expect of exciting pleased excluding facilities, business. have Fiscal maintaining integration this XXXX the fully integrated will very year on we Petrifilm, growing product we’ve progress our all the former the production. the efficiencies end year, on Neogen on Beyond while fiscal for to in be

facility production with along in Lansing be office similarly driving and to sustainable. independent we respect our Construction arrangements the interim, We the to fully on back transition and the manufacturing functions focused in also believe new coming efficiencies. and is positive in expect well, are of distribution developments

to continuing drive innovation skills ultimately means this as leverage plan our On are existing in growth. prioritize members the ourselves of expertise market. a to differentiating of the to We product team and different front, new fully development we and revenue and

And enthusiasm move and excitement the to throughout for lastly, hard want fiscal dedication team thank XXXX year, the members past as and we world the around their our work into fiscal year. I their and

global fully efforts together The to all One the progress team and one have required mindset are Neogen in working easily, the have has This extraordinary goal the success everyone to we common made and involved. be achieve from had food and have security. not we we leader have come embraced

the things turn to I’ll will begin Operator Q&A. the Now and we over

Operator

first [Operator Please Daley Tim Instructions] you. go ahead. question Thank today from come Fargo. will Our Wells of

Tim Daley

color everybody, great the the on for congrats a Thanks appreciate time, year. quarter on and and Great. the I

first just one guess business. here the I So on Petri

how in there… three the is really lift sequentially, you that could So the uptick know, maybe, good help understand down got that maybe arrangements -- that core Dave, those away guess, much in But sequential manufacturing chipping buckets, hear work if I the just of kind you’re us strong I backlog versus of here. changes revenues, transaction you’ve to backlog don’t at was versus growth, numbers,

Dave Naemura

Yeah.

Tim Daley

any color at directional … least?

Dave Naemura

directional color some think, I here. Tim, Yeah.

March kind comparing backlog of period better trajectory as Safety we a I of what seeing that had even sequential performance see improvement think saw came better headwind backlog Food of some improvement to or the And if out what we our the the We we and the that when was period growth through talked obviously and QX reduction. progressed is under look a think, saw the saw to mid-single-digit it, in we agreement we you marketplace. the build in continue QX. into I year of with

think big relationship won’t have sustaining One, manage of continues although and this kind two I be that, continue to things. we’ve gotten there’s be the Having through said will to we think what things. I perfect. issues, It

have we’re through I think and I flow here here to overall, gotten as some issues. a folks work well, earn few going going bit, that and the we we and it’s the fixed bring have partners that we as little think we to it continue constrained some a demand back. and back then to we’ve is directional forward think it asked very to good think will need we answer is bigger but generally, But, And of go a ebb side. had

Tim Daley

of an nice guys of companion how question next a call growth -- full provided there environments, Great. Appreciate support macro year kind just numbers as to think basis? update called and the into on on year get and John, second that. that you the And about, should genomics were here. how plays we being a animal in today out a here animal wanted headwinds

John Adent

Thanks, to Sure. call and we’re welcome Sure. to you And on. the Tim. have glad

two talked uptrend. the about these And think on and that cyclicality I I a business of in you the of the it we’ve lot markets. approaching ways. think in if starting is, livestock, think been larger for see you’re One are an we thing to we this top about

things Again, see the some was top that just going processing milk, where -- and at bottom, I I because to segment, there’s seen call of it’s bad But start calling you in good I be to it. the dumping producers the you’ve said, won’t enough are are not dairy so not at -- because I’m prices really the cheap.

beef but not in great. right on calves, the historic of we’re numbers the not still are high, The hanging lot are there, a good. calve seeing guys price swine Beef, now is pretty it’s because feed

that the you’re bit on protein little dairy start side, going really market. tougher think but first, seeing be -- you’re my to starting going I seeing is So expectation you’re moving forward a

is offerings invested really it’s a great those but compare, COVID couple than even the that’s out that in animal traditional rates companion around space years and you all the longer for years, our last product a tough the market and and a if you all Companion over during companion period of still pet. of ago we to market couple look because had improve a COVID, why service puppies COVID longer term growth cash,

is that’s area We’ve We new continue focus tests things going a have. to for leadership to got marketplace are These that a to an that calve And forward. our side be us that strong position. the test. think really just don’t we It’s going market. others and our great launched new genomics the are growing solidify on

Tim Daley

Great. Thanks for time. the Appreciate it.

John Adent

you. Thank

Operator

Vazquez ahead. Our Please of go question Brandon come next will William from Blair.

Brandon Vazquez

Hi, end looking everyone. guidance year Thanks strong the the question year. for and congrats to and nice taking and forward the a rest of of to the

in guys Animal Health can bit that now, about maybe talk seeing you you’re the some is Safety Can in anything is on you Animal it what give of were terms of Health topline. a macro just -- just just color the especially giving talking John, but versus headwinds still destocking. a Food and little about, some we’re on so on kind or distributor maybe you guidance, expecting growth, First question us on little

not kind next guidance? mid-single-digit baked get of is business the growth that So year what’s can back or that to in

Dave Naemura

Yeah. Brandon, it’s Dave.

range kind we the the the Safety it Food higher the shape higher of guide segments see but kind year. guide, Obviously, than a side. in think That’s of Animal. Food I is on both mid-single-digit mid-single-digit with how

Brandon Vazquez

Okay.

is at offensive, benefit are guys this point of Petrifilm come Can in you of up are still the of any the feels going direction, on in supply, able opening to this is -- quarters? you then you sounds are like great kind durable. the sense right -- or more new And on go things today that’s it a accounts kind that Okay. coming

John Adent

No.

we just mean Meeting National are. I this we think nice. held it’s Sales our mean, really I week. I

lifted like today a excited. right? of teams finishing We’re and super everybody’s are wait the actually inventory It’s off up USAC for shoulders,

when -- to first going not have conversation That’s product. about now their with customers they’re get the they is

what help I The that we your to can protecting first that’s positive. you, consumers and think conversation now been really make do you’re is sure

in the was thing. I month, same Asia last

think to you’re front So tailwind fiscal some see going I we’ve real got nice year teams this next with going their foot. the into on

Now we repair right? some to got damage,

product last the the not make over sure I keep blame can relationships nice some heard with don’t we for months, having job years and of those let’s yeah, you couple it to mean I couple going. customers say, of available great, last

will time but on trust, really the sales foot front teams repair that so about. excited to I’m little And their which take a are now,

Brandon Vazquez

Great. XXXX margin I doing for Dave. maybe guide. correctly, something Okay. And my then one the at guidance midpoint one of of EBITDA last like here, implying kind maybe -- in if sneak math I’m mid-XXs a the I’ll fiscal the is

it, quarter, you’re or, year. you flat then keeping are here think the of and X takes EBITDA kind mid-XXs for full you incremental for of margin at to guys. points and year to Thanks, What I fiscal XX% this that puts call what you XXXX really guidance? So XX% get next XX% gets the

Dave Naemura

question, Brandon. Great Yeah.

two that’s and that right, expansion and gross planning, of you by what next what we’re is see mid-XXs higher So at takes some kind you’re margin offset least flavors. year, on OpEx

offensive, some commercially more some that, as year scale. of businesses this you the exit but the higher full to add office new One, also with with back back agreements, of office on to annualization some both we’ve in invested further the of XM, a off get have the the arrangements these in at year get we to noted we’ll plus

won’t -- million. I’ll call and call XX%, $XXX When we it, forward we look it look I at

the do need drive the to you you margin expansion. gross say, would math, if think to we I continue

if You’ve heard even year with investment so talked that, on I talk XXXX is historically it precedented XXXX, that. with about. zone combined growth XXXX mid-single-digit then for is about OpEx, that, think down in to math of rate you say the what us would we’ve And that And the comes right? put not, the

John Adent

in Yeah. with Brandon, Dave. fully And too. that, I jump can if on I agree

growth. We’re investing in for year this OpEx

right? there’s and teams If you doing, really two we’re sales what world, around at we’re driving areas in that the look it’s investing really the

putting in our because at includes U.S. we’re on can you and need market that street. mean And have our need the I we grow share share, feet opportunity the because with more we the headcounts, representation look more we when just we

we U.S., see talent the and So only is internationally, the we’re that seeing areas but to acquiring there’s approach international, opportunities Same that Asia and because for open customers those gaps. huge those close in with opportunity. huge not we’ve some got we’re in also of us, a like and that thing

of size the of the some teams Asia. have we doubling We’re in

So that’s we’re investing.

And versus to doubled a harvest really of next advantage we year strong else last in it we’re then analytics. We’ve are because have again year. two double think and making to everybody this year. I from areas. the going mean very than this lastly, that, invest on we we expectation these investing we’re competitive the so decision is the marketplace My number rather sites we’re pushing in year

Operator

[Operator Please come question go Instructions] from of Our next Westenberg ahead. Piper David will Sandler.

David Westenberg

the a on guys, morning, year. to strong congrats real finish Good and Hi.

John Adent

Dave. Thanks,

David Westenberg

as a as is revenue percent as to were you versus going the we give it, it’s know, XM’s it’s question XXXX, maybe possible simple control? calculation percentage of it’s of under had that’s is, to be things us like back it’s what’s I all else, as Petrifilm, are maybe of into something Petrifilm. just XXXX, get control simple as -- your we the be of what that if maybe let know revenue QX. as don’t if wanted percent percentage into going ask I But control your but maybe quantities the like, because products And what as under saying like office purely soon these I is to know go I to or

to that’s helpful. quantify if it about know would way right really it. don’t the to be think I Any So way

John Adent

And have we Petrifilm. you’re mean, third of shop the quarter, our David. right. in exactly is, -- it’s the It except I will everything by end

a just back if agent, else you right? run from that’s everything Petrifilm out by So the manufacturing standpoint. And be to

And to back at the cash all exiting distribution. office we’ll which the and order be same TSA, time, the is the

also in same will So be period. at distribution time our that hands

and So just doing Petrifilm and be excited really we’re else out everything take will about under, that.

we’ve quarter, is two And a handling we’re accelerated in place. and the which Sample and other moving line bit like we the getting talked about is pathogen those faster. for sample lines, the handling little last line along that

in We’re them getting almost week. next

with least So starting some lines. of the at

have will by third end those we the fully the of So integrated quarter.

David Westenberg

very what are of new should talk Perfect. launches going product you And that XXXX then the market think hit to in? expected are Thank any that is kind that you guidance about -- to much. in those can about, and we be are there segment

John Adent

the toxin and I’m far, for side. right? There this a number I was allergen, had and DON had, we quantitative XX the close it did new with on to think, histamine go new to ahead Afla we across, on a not launches we going too what we we launched again, saw but of You think are. year test I saw did you

We do really the So excited tests XX great seconds. uptick about Reader, in the new with Petrifilm I’m on -- new Reader. the really under new X we’re getting can

make We continue next-gen. to

the the what that’s is next thing So is upgrade next equipment. for the

upgrades, strive that’s year, continued this to had toxin, and going equipment year. something the So we just see you’re those like pathogen I we and you’re for continue going in core think to lines to this every year. expansion to improve lines, see allergen And

David Westenberg

one to with want tends just to more in a -- one Got in sneak now. companies labor right we’re topic of you. kind And be dealing the because maybe then I all

they’re Food try for Safety controlling to should of going at costs prioritizing How spend versus labor I’m terms willingness one labor your really are this market how markets sneak new of they customers, how to products and in just we Thanks. to or As then in versus really you we’re controlling labor kind think spend? for And tight looking SG&A integrate labor about that? it. prioritizing willingness

John Adent

Yeah.

the tight when us efficient do market our to So our competitors. what it because for in traditional hits, is methods a us, that’s be benefit more labor systems allows than

which time So to customer’s our on customers manpower, do with back are more were why right, so and testing, we’re forcing able Petrifilm, upset people right? to their to have was save our we the orders them involved because

very for make So it’s effectiveness, us the when new and labor people see in we are only you a not mistakes, are have markets them that to it positive when -- training you and addition improves trained. very, got we people right? very And new also tight. that, to them, you’re get Because efficiency

Once away have confidence coming walk the up and very a you you our of and it, the results equipment. run set set you high out equipment up on

focus So messages. our on It’s those selling something that’s great really a we It’s point great. they to and a us. are positive something with for for customers it’s us. It’s receptive a --

we’re else. On like our front, everybody

think we have growth restructure a lay amounts what a of of don’t us people. have we where as to and I times company, lot we off do large that helps

can you So strong a work job and an if markets you come company serve. to recruiting. a -- we is telling was you do for which continue to quarter, XX be the where have good in when for so think, Neogen, me, continue to to promote hard, internally, we promotions, the we great I there’s a pretty internal reputation going good had a to work we almost in thing it’s Then opportunity that turn you We for Julie grow. four,

I a great great that’s the to So It’s warehouse market. we’re growth but think centralized we’re our way moving in there. a -- in new we’re Kentucky, smaller that market markets,

We’re pulling employees. from of really strong pools

we’re close wood, of been now, I in think but lot of a So rates on five the a on years, knock has work lot had lowest which to things, different really right turnover in direction. heading right at we’re the we’ve

David Westenberg

the great year. to John, again Thanks, the on finish congrats and

John Adent

Appreciate David. All right. Well, it. thanks,

Operator

will I’d we over time, turn this session. question-and-answer conclude the closing at any to Adent conference And our to like remarks. for John back

John Adent

appreciate your really thank and team We It deliver XXXX outstanding team. Allison. once been has a and you, Neogen I to did the to the challenging again, job want results. fantastic Thank a support,

excited quarter change really XXXX. forward results to really first we we There’s in see the to ahead coming going and but you about a we lot excited talking on, of are fall. about We’re what about look

Operator

concluded. The has now attending for today’s thank you We conference presentation.

lines. You disconnect your now may

Neogen (NEOG) 27 Jul 232023 Q4 Earnings call transcript