NEOG - Earnings call 2 2024 | Neogen Corporation

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Operator

Good day, and welcome to the Neogen Corporation Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Bill Waelke, Head of Investor Relations and Treasury. Please go ahead.

Bill Waelke

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

as we non-GAAP the our market well certain Investor refer our of that website. today, in Slide our and measures forward-looking a On are believe Relations today, evaluating include within results opened measures both presentation, will provides we to statements performance. Reconciliations with useful financial non-GAAP the published reminder are of our section remarks presentation Before that X the earnings quarter historical documents of call which will included our second financial we in as a available release in our matters in of meaning results from Reform be forward-looking statements the subject Act. forward-looking among actual others, These expressed Litigation implied Private have that described different to and cause update are the risks annual XX-K statements. These forward-looking could to Form or we any materially by include, I'll risks such we other that, things over disclaim most to Securities those turn John. our statements. With filings We on with in report make these recent obligation to the in SEC. that

John Adent

time XM is exciting call the second quarter milestones integrating safety the an covering of food near-term the Neogen Good Bill. earnings approaching journey fiscal welcome everyone, of business. morning, year. XXXX our Thanks, on as former several This to and our we're at

the that continuing internal ramp have made transition September, agreements with XM further new our our of exit Following we the launch in system up service we progress several initiating of capabilities. while to by ERP

track the of on otherwise quarter. transition relocation of outside product of complete expect in the the On to completed of front, in agreements QX former first and pathogen handling also by handling Petrifilm successfully third remain the production, to now lines facilities. relocation sample we The Neogen XM the we phase the sample manufacturing exit the manufacturing the but all of end final

last results They quarter. with communicated margin second adjusted the earnings open second legacy to were the call, quarter orders to on Neogen negatively quarter Moving remained growth we modestly in XXX approximately backlog the Safety the points. and and of revenue mentioned products revenue call first the our with expectations primarily last at our ahead XXX affecting end of EBITDA our our basis line The on quarter. Food core by impacting earnings of we for

in came inconsistencies to capabilities XM transition low, Inventory rate. strongest Food been was We are new year reduced historical segment, in detection, encouraged In solid a back we in quarter, Japan the destocking core absent acceleration supply Petrifilm elevated performance Food been in in channel see segment, by backlog. we win the we've showing growth saw We up core to product winning manufacturing in due backlog. open replacing to of Safety are through lost remained and the destocking while prioritizing the our orders moderated experienced first Asia in we and mid-single-digit distributor an the category but experiencing modestly, order improvement a it and our with prior would have the have levels where business Safety significant overall a compared combination in grew the through opportunities. In Pacific Animal and and in in microbiological quarter. the from leverage was Safety the growth revenue we the that current share Neogen range, at complementary hand where our working the China pathogen partner. The from

improvement well core the as as headwinds from from growth where QX incremental we not genomics, companion rate did some decline improving seeing to more a by the of through distribution, shift production genomics, basis nice QX XXX are animals. sales Animal points. In animals with saw strategic go Excluding focus in profitable in larger, Safety to

dynamic, improvement end we've of are Although remains in encouraged by the the we markets. environment signs our seen

In Animal the stable first the to remained for demand end-user addition backdrop moderating the in destocking quarter. Safety,

We slower the inflection Safety this greater view visibility to there developments, slowly, beginning of as producers these but updating for these impacts our a the contemplated. Accordingly, business. inflation On half continuation a pace of with view first lead shift food Food is outlook of albeit side, to improvements full including positive than believe in the calendar volume we year us happening will general a full current had in are to is of strategic genomics year the trend and view our ease, now our XXXX. the the underway at originally outlook these that are year affords we reflect

remains on continued capitalize end the through of have With market been safety the opportunity stabilize, creation an to environment. while the challenges, to beginning largest XM progress ourselves improved external value focus positioning experiencing we've on integration the our former we food seemingly on business

Now more into I'll the turn insights it results over for quarter. to Dave our for some

David Naemura

and you, Jumping to call on John, the Thank welcome today. everyone into the results.

XX those basis our Notably, points, prior of core anniversary to and second while growth. the the compared day same Safety just excludes X-year we lines year. quarter and of acquisitions quarter, revenue, year are a XM of Core essentially Food the second were discontinued declined transaction contributed accordingly, lines net in points on quarter. Acquisitions currency, revenues included compared revenues for the first $XXX the quarter Our flat X% the million, impact XX added a currency foreign now and foreign product product the our ago. under passed discontinued basis which to

benefited in core to orders level. the as core which category, increase America. segment was bacterial in Revenues growth million the general in sanitation the increased led the were compared John an $XXX as distributor pathogen The from quarter, to year, Latin Food of business Safety Moving our wins well of X%. mentioned including growth and prior product by X% segment the

prior lower increased X%, through for from improvement less growth a led the a sales media test $XX decline offset destocking instruments by a than care Natural a delays. Quarterly in vet segment that first notable tests core by substrates care Within toxins distribution decline demand in was and sales down constraints. by quality growth decline natural which primarily in of due Growth the nutritional these was in mainly by order media by and culture to quarter. other continued was decline and had a compared and and food ongoing category, prior manufacturers includes to allergens Animal shipment with trend syringes. abated and somewhat which result nongenomic categories growth due and disposables higher period. of mainly toxin with of testing in kits to was allergen to of animal were detectable revenues in the large quarter. Core with used product Sciences, diagnostic mid-single-digit the the core wound a supplements Petrifilm year offset The in indicator, test a sales Safety other and kit certain this offset go culture category supply sales segment needles solid primarily X% analysis onetime Life of and animal in the in products year revenue due million,

deceleration in in a experienced biosecurity a slight by with higher core programs. Worldwide the decline basis, offset control which mid-single from of products, a first quarter. rodent result certain products, core volumes on revenue decline marked insect revenue was largely phasing distributor control a down products of booking Our the genomics digits the

hygiene strategic away perspective, mixed. We growth in decline was strategic The related Petrifilm, continued production Latin was effects from focus sales. monitoring shift pathogen which Growth shift led geographical animals, a by these international revenue markets. From growth in offerings. our to strong from core America, double grew see digits to low of reflecting beef this small offset and

significant the solid growth recovery Asia from in a in the Pacific and mostly by quarter. Canada, impacted Japan most by sales, the showed include Culture business solid trajectory core improvement in that sales. mid-single quarter. In by China, safety China, safety which while digits. of in our Food part of offset safety modestly food mostly genomics the in saw decline region growth Australia offset and total a pathogens, mid-single-digit animal first and very sales grew slight The driven the a We while down Media declined in although in were in range. backlog revenue the U.S. small were genomics, with decline Petrifilm the compare is flat during U.S. build with saw Canada and we

rate arrangements. Adjusted transition company cash the categories. which net quarter was adjusted the margin Finally, the increase EBITDA from Relative second $X.XX cash million basis gross XM year's reduced which full of exit points first quarter second ago aforementioned in was inventory purchase region from primarily of as to the The margin goods shipment working an impacted with by to pathogens total with same acquired the Gross sales net the other by the a capital, EMEA XX.X% a $XX the income food reflecting the lower accommodate also with the range own by driven $XXX remains primarily million prior safety in certain representing was basis delays the million. strong various was year than XX% network mid-single-digit agreement $X.XX, our quarter and of increased declined product the the offset in product favorable in in EBITDA, was XX.X%, margin respectively, in expense. We finished growth XXX mix. Adjusted expansion was increase benefits to our as and in compared at quarter, necessary not at include last ended income from adjusted points million, of $XXX the quarter, distribution per up in in at driven quarter, that a more we fixed debt a of part did time Safety as the adjusted with XX% reflection of year-over-year an the which in followed a quarter. a point products our and Food EBITDA transition the the position second activities. were by that million first beginning expenses, primarily XXX $XX of closing for only of moved adjusted of basis, of of quarter decline transaction ramp offset an enable to into XM share the $XX sequential and of improvement of exit interest earnings from period. representing size EBITDA adjusted On year

first in half John As the to of year. fiscal position update view us, the earlier, we are with now mentioned behind better our a

believe do provided we guidance are in in our we steadily things are we While as not the to July. markets, believe improving original in they as end beginning stabilize contemplated

genomics in our expect updating and of recovery between business EBITDA million. in our to We well are the impact and we revenues into guidance full incremental pace slower million as be adjusted the expected revenue, the will million the reflect $XXX be to $XXX $XXX to of $XXX now of expect now range million. Taking as account headwinds lower year

the expect exits quarter, third elevated increase be with approximately $XXX some of being seasonally We expect continue from next agreement work to and from despite transition including integration-related million, the do second repeat quarter which capital expect it million, respect impact we we to modest expenditures the and lower our a to ongoing not approximately historically to expenditures fiscal of capital the year. With in $XXX backlog. revenue majority

improvement for half. year This of the agreements. I'll thoughts. the first driven fourth and adjusted more quarter some We than volumes and substantially the the margin back quarter would our in higher hand call the higher in transition now half second by increased seasonally of expect to closing John EBITDA sequential the exit in reflect to be the third

John Adent

of took initiating agreements, steps Dave. our important Thanks, system quarter on former We are the significant the Food XM exit we're our second Safety integrate ERP which transition the to business. parts the journey and launching of in integration new services

and which even position strengthens tailwinds Moreover, capitalize making we been as by we weakness, by animal While working to integration driven the in the simultaneously more and the end COVID from been has safety, improve. only inflation integration, both which integration, also terms it post to prioritization we normal we've of on profile we've unusually are of key continue post navigating in food capital the recovery primarily us initiatives spending happening an believe market markets on been quarter to and closer puts the levels. progress to settles relates forward financial through production as it into this began weakness levels. particularly rightsizing believe see as end signs end our growth particularly of that as is We our is abating, move what and and secular attractive integration, distributor to they supported second the output. Encouragingly, market inventory volumes food

Our tremendous so on the for businesses these milestones want thanking today the now and upcoming once by team their operator and to things hard effort of wrap world turn of I dedication. I'll begin the the members integration Q&A. here have and up to our again expanded do high-quality ahead around continue to to them over work

Operator

comes William [Operator Instructions] Blair. today Brandon The first Vazquez question with from

Brandon Vazquez

start a possible, bit bit range, in the the a range, the of you of that the especially you of the this both if us little of back and I'll macro What given maybe Dave, ends of the in the end little half updated at target assumed range, through the in with you a gives Maybe end any might guidance low coming like at benefits walk can kind And the quantify at the backdrop. of what's see of those high the of what's assumed step-up moving given you. of -- moment, you can profitability? confidence that year? kind in sales on is some

David Naemura

for the question, Thanks Yes. Brandon.

first little better a half. is seasonally think of half the first the typically I second all, than

market. think been then stuff we to to the year. about slower the some and so market some we're on, levers. And said in see are the that that that half, those at We I pushing talked counting had see happening need third we've on of the recovery impact that frankly, to that in little in as as challenges improving see develop. improve the quarter the out, improving the market in Again, the second see anticipated door. we and it's out the improvement when think second greatly. the I had bigger we think slower getting particularly We we seasonality. need a year The we well. So and but little macro, we've some end goes X I And a And look not during

improvements on. So the the lot range. as We happy in what shipping pace anticipate of but we a the recovery the in going internal John was some accomplished there impact second, there noted, will in We're pretty seeing with third.

bigger those levers think range. I probably a are the the couple within of

Brandon Vazquez

Okay. integration the And you, of maybe, work has John, past higher happened. now, a level picture, a lot for great deal maybe year a

a to digits are double-digit thing about single some we plus, periods talk a seen maybe one I yet quite think combined haven't as growth even those we used of kind high entity.

here. a know all the So for macro harder some I know there's maybe of to obviously details. lot of other and specifics us factors There's moving integration, there's those

here those So we year on we where end, look fiscal 'XX and we combined then track change is this on for pro Dave. as still at with at Similarly, of for guidance, we 'XX are fiscal are targets? fiscal that what of kind forma And 'XX maybe part the now your from second has can entity all conviction that sit a your do later?

John Adent

to to is be Yes. have made But my And the term. the that second mean and has amount this it's progress. on noise excited thing Yes, it's things year Thanks, changed, to I I Brandon. the seen think done. of long accomplished -- me business future when going the I is about what Good that's to going we in things the that's and think the see first really everything this look conviction quarter during talk and much all through gotten better. look we I've we're of to sometimes that so gets even you. hard

off agreements. with predominantly, the about the SAP, quarter done moving agreements to converting the service in in of all think tech distribution moving things we've You the

number out we're And building up. then hanging I thing plants, and was that is the I is I going. the up. enclosed, there firming think Petrifilm, such progress. other the is is a It's The One things excited equipment's I there mean making great of saw. market by

when firming Crystal are we we to where is food ago. it we not Ball thought up. the out But safety seeing X that As it's Dave to was months said, got market

The are is we same. gotten has levels The any destocking thing They down. the other the lower. slowed inventory that see haven't

I doing an there. think point inflection you're

and about into quarter, we strong talked are had with customers second right what So Petrifilm bringing MDS around business, that worked business selling. resiliency. the very Pathogen about then business Right? We franchise. a excited strong to the are I'm And the business growing quarter. half. excited cross the existing new that really pathogen where had a Neogen I'm moving. had very is that and

So excited And really the was about quarter, the which I that. for bounce strong like. back then really APAC in

and to do to I'm we've that let got we a We've I'm me where them excited just lot us, behind We've people ton. we're So got -- of a yes, do. about things talk and us done to really front it. excited in of than a more know going. lot We've gets excited.

David Naemura

-- about in and to point lot of in quick And and sign ownership. Look, a frankly, really XX view back transpired your guess, the December 'XX 'XX close first mean or Brandon, between I we now acquisition. of came out a 'XX. months on XX more with XX the originally I months then I of, of the

see or the be bullish market what see will what's on 'XX we as I we is the on the the although long-range more same John in where of we're potential exit, think when notes, combined that. businesses maybe So we dependent even

out that's next think these thesis timing time, next through thesis while based to here we're we'll businesses and guidance update to of in we and view the that takes combined want timing call give It's around to working of see for the on the now kind to our think play. It's update of puts holds coming our 'XX we'll an and what difficult still year We of 'XX we the then. we is market just we 'XX. exit between So get holds. give the on and to people the the Important guidance rate get when as an at year. note outlook for year,

Brandon Vazquez

that follow-up comment one Okay. were And you maybe last last making. to

talking the we of uncertainty Just moving today 'XX that factors 'XX. these on biggest from an lot eye many a executed be are to keeping clear, Is in macro? fiscal to Or they'll be fiscal in we're pieces, maybe other the but be like on? of there should bridge seem

John Adent

the biggest within base of the think but the macro is. we're through is that everything I control, not our going work of things are recovery state macro to economy,

So take exit the as we'll on the snap the -- we we'll line environment year.

Operator

next The Piper Sandler. Westenberg with question from comes David

Unknown Analyst

This the is from performance Can about that John on look you Dave. for what business should loss customer? forward? us And would walk the of the through going we aside how like think genomics

John Adent

have you when under So what's smaller the that's the like low those But poultry decision business, value those us. the in a when that and really made interesting when not a that for price think said, tremendous services or where customers to driving are you pressure relatively we is we genomics point to their you just business. distress got service that about use animals

of not material. ways I it's So larger price animal. really from to really predominantly just the business, to And really business the were. value, a companion point. Quantifying piece when some environment us. to to those really have you predominantly big it finding I of a the swine, the million unsustainable that. It's that got a we is not macro refocused customer not the $X point, was poultry is losses dairy a me, that those it the -- about really but which mean poultry it's $X and for it's and think and I move what challenge but total really it range, -- It's million think to in cattle don't animals, that's higher

Unknown Analyst

Got of be this of in it. us thing should And our half can think at stage. any calling remind I'm second particular other models? for we you comps aware I out

John Adent

with John, do. thing macro environment, right, we I we is the talked like about the thing, the looking mean I at think only same

from with our growing. that customers who commentary we're where pretty much are buying bases around same the at they number the are of half, their know and You they really but they're things seeing a looking aligned that the value them. still not them, they're and saying second I've are story And improving seen customer market the with the that

and they're better, a sequentially, to So getting the we're not still point marketplace. what seeing that's it's they but where in growth, have

would I that that thing is think most that want I the would macro anything you So watch add? environment. to be David,

David Naemura

I think that's right.

Operator

to John like This concludes back conference our any for question-and-answer Adent over remarks. session. closing turn I would the to

John Adent

for I to a I fantastic and I second half you, just We're in us to morning. want the wish of Thank everybody about all of want of and this forward you talking thank Betsy. joining excited the XXXX, look you to year, to again April. all

Operator

Thank attending you for presentation. conference The has concluded. today's now

You may now disconnect.

Neogen (NEOG) 9 Jan 242024 Q2 Earnings call transcript