NEOG - Earnings call transcript Q4 2024

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Operator

Good morning, ladies and gentlemen, and welcome to the Neogen Corporation Fourth Quarter 2024 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, July 30, 2024. I would now like to turn the conference over to Bill Waelke. Please go ahead.

Bill Waelke

Thank you for joining us this morning for the discussion of the fourth quarter of our 2024 fiscal year. I'll briefly cover the non-GAAP and forward-looking language before passing the call over to our CEO, John Adent, who will be followed by our CFO, Dave Naemura.

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

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

John Adent

quarter, to process the Kentucky production to quarter. ramping continued Bill. sample year. fourth of of full XM be are up third for former our the lines expect the milestones month. on our end which in Thanks, relocating After integration the product of we the at levels, XXXX next and finished in multiple facility now in We crossing and in handling Lexington, to morning, progress Good the everyone, the welcome in fiscal call fronts earnings fourth quarter multiple significant

quarter. production teams under to basis throughout environment on the generation. Food end return pressure, shipping quarter do to remained allowed customers market also their commercial fourth our performance continue in mostly be and as saw was the best, a our to demand focus year-over-year this volumes they down stable progress has what We in the but improvement fourth

inflation ease, our are slowly With will over drive the backdrop, industry our and volumes fiscal end that demand. improving our to service market teams particular expected broadest the customer to product of the are XXXX course with the commercial to food year. continue improve portfolio in belief Along production leveraging for in food reputation generally consultative the

Now results revenue for growth categories end and safety user for In solid the to levels remain product grew quarter. the inventory Total stable in quarter fiscal quarter. for Animal fourth our mid-single-digit demand range, the our roughly food channel core of XXXX. following the in Safety, prior compared

our Our segment round-trip are business the lower primarily In still to of otherwise animals, globally, has quarterly of basis. year-over-year the U.S. the on core a we business began in revenue a primarily this and was on to core the larger production basis. In strategic Genomics due impact the down most U.S. were Genomics our which quarter, sales in first business. shift impacted towards flat

plates. effectiveness, of its our well the as driving use reliability our our technology, efforts late believe loading We pathogen beef of June of have in in which In a launch and and announcement named pathogen the was seen our by method the in opportunity part the platform. and MDS Neogen Salmonella platform area. The of as plan automates expanding core ease and followed business of Detection of reader, in Petrifilm validates USDA growth food flat the as poultry. development Salmonella we've significant we automated Petrifilm. screening growth Petrifilm System key eggs represent capabilities notable into Molecular pathogen in meat, reducing to for June, product and a leverage categories. animal the The or recently by USDA We detection a primary initiatives MDS, specifically companion and testing and lab And of majority further this this USDA's automated by MDS the users providing allows integrating for of is growth capacity and are genetic manually market technicians to for testing feed in individual direct-to-the-consumer high-volume direct labs automation and managing Listeria reader developments for Food offerings. With to as more This and lab while for XXX labor Safety our selection need Inspection data with these Service, enumerate the Petrifilm and Listeria level the and the to producer the detection existing on to areas, early up reader, the to load dairy removes designed two product to testing through of plates related respect focusing mostly our workflows automatically plates, priority analysis. systems.

to earnings quarter. to and market distribution inefficiencies the resolve running end opportunity typically unlock to we continued for additional Those We leadership from stemming annually. call, to environments. target high-volume a such some system testing to management leader product but by XXX,XXX the and expect the of maintain our testing labs the us Petrifilm SAP take warehouse time this growth effectively more of opportunities. On committed over investment indicated planning tests in We new ramp believe our are allows market market is the its clear up, first and our last

not which Petrifilm ahead our the But we production still and focused impacted operations. and our these quarter do back we the were resolved of the that commercial respect issues, work rest majority impacted. With the involves completion affect squarely to vast of are by sales the us. our the Although they now have outfitting was on been winning integration, expect efforts will fourth facility, effectively of new

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

David Naemura

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

was points the while headwind year. million. quarter fourth which acquisitions to the Core a currency lines $XXX XXX for impact the foreign foreign currency, product basis Our and excludes revenue, prior X% of were revenues of discontinued grew quarter, compared

during by our was impacted quarter, significant revenue total we lower progress the Although fulfillment order our rates. made

by quarter, million sales prior in which segment over decrease to led and was to growth the a product in and pathogens and The of a indicator year growth our categories our slight Petrifilm line X% microbiology sanitation saw from analysis. The double-digit as sanitation nutritional prior growth due X%. level. partially period. well in core media primarily bacterial of culture product benefited in higher the by of and equipment were decline solid as Food quality in food media including product other level offset Safety testing, to a Moving Revenues category, general growth general compared year, the segment in core in culture the $XXX growth

prior the a quarter. growth. Overall, line the product channel mainly of offset of Disposables natural category allergens in core dynamics. The revenues modest remained Within specific reduced had in to our decline toxins compared revenue toxins core Animal and year due being Instruments a with growth the driven Vet category, inventory the was core in Safety of largely and by quarter availability. Quarterly stable in includes were decline product natural couple solid to a levels revenue decline $XX X% segment which allergens another in product million, by

category, growth sales control was and in vitamin product other the current due control portfolio year timing of and and biosecurity shipments. Worldwide digits to disinfectants by primarily Within compare in a our on growth on products, and strong products. was injectables cleaners challenge and prior in genomics quarter offset down year a core rodent revenue basis. declines by mid-single strong Biologics insect core our care of Animal the was In led higher growth of

production by Solid categories. animals growth food perspective, on by was key we exit which additional key in The revenue into Latin impact growth at beef mixed. with saw was the the markets the driven producers. strong quarter of the in across of from in digits the growth a U.S., led back Latin fulfillment, core in well by offset distributor the fourth a growth restocking quarter. From expect which was level decrease we away most performance Growth double order and business EMEA was America, and some progress product small first to America shift regional as

single decline Europe Biosecurity with in handling a grew sample Our core on business media, culture digits sanitation in in and partially products. low a by Petrifilm, general strength basis offset

revenue grew general sanitation strong handling. by pathogen in offset declines and and in with year-over-year basis Petrifilm on sample core growth digits Pacific Asia a mid-single

the other Our in Despite Animal range. a U.S. Animal and delays Canada safety in core in food from Care, by Vet with main level impact the declines Petrifilm shipment mid-single-digit our performance revenue distribution Safety was genomics. Instruments categories. In which product did region was modest center, with growth quarter and saw in biosecurity in offset the declines the of the mixed largest in by the most down see offset segment, impact,

gross share underlying our basis this prior Adjusting not a in was The the primarily third to a representing decrease cash the XX.X%, at and the million, integration-related to rate, some and points a transaction costs and the for Compared in year revenue flat XX.X% to cash debt costs, of quarter decline $X.XX, and of by run inflows. $XXX current operations logistics quarter. quarter in primarily XXX roughly should QX XXX XXX total margin stabilization and expenditures, quarter The adjusted ago. adjusted what respectively, operating in decline margin net our fixed points from year same QX $XX adjusted some year-over-year of that EBITDA level is basis of related primarily capital XX.X%, from Gross remains with earnings driven points. of income compared per EBITDA rate a the the was in $XXX outflows additional higher quarter approximately a million declines was we driven of resulted and basis the basis in fourth with distribution year the adjusted million. about as below quarter an was charges believe adjustments. Adjusted of were offset and a points. $XX the which margin result inventory EBITDA. We a with came lower by higher-than-usual FX. the impact transaction EBITDA margin $X.XX ended decline of million representing adjusted adjusted EBITDA for level the the $XX by Overall, cash by margin in in in were million gross of margin The XX% decline of decline quarter, was recur. Fourth position quarter, in XXX negative of gross

'XX. year fiscal the for outlook our to Moving

on and We the range with slowly revenue the $XXX are million mid-single-digit progresses improve an expect we core market growth end between revenue back of total million. environment, anticipated year expecting $XXX to as the in

of basis constraints the the we our back expect experienced of following be sales winning focus little XX% half XXX as on the first margin points and EBITDA million We expected fiscal million be seasonality usual year full wider second shipment midpoint. 'XX. Adjusted around the the margin a for of than fiscal $XXX is to $XXX at and its to we XX% of approximately incremental in 'XX continue reflecting over an half of expansion between

expansion improvements move past to peak We and expect the revenue are efficiency by sizable and spend margin as year. With fiscal margin we expenditures, expense to we gross in operating growth driven 'XX. this decrease a respect aligned of anticipating throughout be with the integration capital

For now million, of being capital territory. I'll specifically for cash fiscal higher with to will we integration related positive to flow and million adjusted CapEx $XX expect expenditures free approximately repeating, closing with XM into some in thoughts. the $XX back load in, lower believe well 'XX, John working approximately capital call not EBITDA We the hand combined result items.

John Adent

continued as a discussed and have to we're food have to progress that tremendous combined expenditures environment to in both in in Dave. operational combined with on towards by been in XXXX have end of a services and with extricated cash our now normal to we're Thanks, driving we're now our of progress peak amount operations. ourselves the outflows our we partner. Neogen of portion able of to came shift of able terms trend from see much look the bring the working facility One center basis. demand and the This couple last seen transition safety of our which resolved. Fiscal for we're integration Neogen in markets excited the capital building, XM Outside a The improvements investment. and inefficiencies capital unconstrained combined the power Commercially, operating integration, provided focus forward represented distribution improvement significant of an the quarters previously more these a of generation we operations new in

our recent of top demonstrated by a some As remains launches, innovation product priority.

new Simultaneously, invest underrepresented continuing ease testing platforms number industry. today. the technologies believe behind our in key technology that meaningful and we're quality position our the drive a leadership we are food We are strengthen growth, to where in regions we can where to and a we exploring of have particularly of safety opportunity improve

work ahead have to long-term we us, significant amount are a position of to we understand While committed of business opportunities on for behind us to that's the the growth. executing and continue

we've work, not made sacrifices of of around all for and their achieved I have what dedication them would proud team Speaking all been and members again the continued want made the world. the I'm progress by without possible thank date, efforts. of to to our they've

things over turn to Q&A. I'll Now the begin to operator the

Operator

[Operator first with Instructions] from Westenberg question Piper comes Your David Sandler.

David Westenberg

beat good of in numbers. Congrats end big on All guidance right. year, line. a And the right,

So Petrifilm. let's the with go

pretty X business. I it's Let me on, ask important that question Petrifilm bunch kind of on just is a because a think

Customers sort of new business of talked would customers a Petrifilm? And back? back? of that still figure we And then look much customer? can would reader retrospective Petrifilm customers able as automated give out versus that you that come your convert talk to to be that customers. at distribution low-volume high-volume won actually about you on you how Just can drive to Can are system. the course, some you So Petrifilm, what about how to are ready customers just us that maybe you've high-volume of rate customers us can to give your love of percent the of

a was lot. that So Apologies.

John Adent

let right. missed the something, all for it. That's know. got If I Thanks I David, question. me

So, yes.

-- in grew a mean, the We the digits nice saw thought I that for Petrifilm double growth teens. the low I nice you We saw in Petrifilm, in we Regarding was us. a quarter. fourth think quarter had

I and growth continuing. great a in end us. The for actually still still for were I decline. see of we did what a year. they're back, little think Japan see that customers. able It's you the lost we we saw are Japan at mean, single-digit where kind soft. claw markets had We We that to opportunity low that

year, us in production is we're little segment. see we we in a fiscal And gradually that's for of the with think in kind bit improving to some where half So to that's change going going there. challenging the back next food think continue our

where safety, we talk have And that market David, we're a really to throughput that type going of labs. -- portion XXX-plus ancillary the is labs the feed that on mean, of going labs, XX% that's the that producing nonfood reader. I Yes, can today, those look, market now at be same for and to really high to Regarding read have do XX%, growth. It's stacked though, throughput term excited in in of focusing, because approach in And remaining those an you right? share what we're to we to us, It's manually opportunity our food high a we in. when about target with an see longer equipment.

produce products out markets. can't today until really line those take to address the bit our we we're Now of going to have developing manufacturing can't expand use in to house that's SKU those we going us a coming that XM. because because But longer little we're we

the in about we're labs high-throughput the a an that it's having to meet new with to going a that targeting over then we're that are market with. for These years tests. as excited currently address broader us it's opportunity be SKUs are work of really next to think We So that. going open develop those labs to opportunity we markets. really do probably we for food-producing XXX,XXX Those ones the And those couple reader.

David Westenberg

it. No, Got helpful. that's

in dive can I little if bit. a maybe Just

like catch And Petrifilm. pretty sound Did I revenue -- high-volume the that percentage a those right? customers does it anyway... high So in represent do of

John Adent

a more they -- customers, number do lower David, volume. but of it's It's lower number a

wouldn't I So it's because remaining I'd a -- I but but of don't that piece. it's -- lot XX%, say less say of it's it's wouldn't I customers. say more of half, do a it's they higher the volume, handful targeted than

David Westenberg

analyst another it just you X. And then perfect. Got it. there, No, so I'll have to on keep

you I the for So talk one's you gross to this -- Dave. -- talked margins. want about can

You and inventory. the distribution cited

like there. points does would basis headwind more be I sound That said XXX temporary. pretty think you of than it

model So off rolling stop you about quarter as just think doing to have we can as next that out of should we I'll about or about we're modeling there. cite as any drag? And other modeling, XXXX think should we're year, year? our into quickly as a that And pretty we if year-over-year compare to couple think fiscal our

David Naemura

Yes. Thanks, David.

And in some quarter where over of write-down, it's the our which fundamentally a on ultimately, X.X footprint. inventory that some resulted stabilizing function fourth through margin -- we continued higher we've a to again, in think lighter gross came logistics inefficiency. as quarter business as and than inventory write-down well as distribution of running. we're amounted the is period. higher think It's some working worked I It's a level

So net-net, I rate. OpEx quarter, think, couple from run the I points inefficiency on little representative side. lower basis think hundred if than of you step A gross probably back margin a the of of the

think So I time. gross I of at points, EBITDA probably come around we light, margin see XXX the line, over basis think margin, those the back efficiencies some

second hopefully, think some we of recovery. see I that half,

the reasonably question. volume-dependent, thank and at EBITDA you you see so gross As both as I margin improvement for margin line the gross higher margin ratably progresses. think given is incrementals, you'll our accruing know, the XXXX also down line But to

Operator

Your Brandon with comes next Vazquez from Blair. William question

Brandon Vazquez

look the is discussion of X about, then the we of are in Dave, risks remaining at, can and what X as side, just talk the And start. years? business a a look integration the frame maybe, perspective? P&L on you you you of the to John, the you here next like opportunities? the can also Maybe the next then what opportunities it, at from here, And same call most are organization kind risks first, from X done the high level, just can as of even years commercial X to now,

John Adent

opportunities Yes. take customers substantially that across And Thanks, the have the everything Look, house Neogen in right? we in is to except regions. next to drive are doing growth, growth X multiple the that X Brandon. portfolio and share now our years to Petrifilm one

As heck, we've underpenetrated. Asia, LatAm, underpenetrated. U.S. we feel in past, we're talked underpenetrated. about we're still In in In we're Europe, underpenetrated that we're the the

to continue XX% core So opportunities we share these in still have to grow markets. a

So that's number one.

Secondarily, with what MDS. doing you see we're

an USDA chose that in we all for that detection now yesterday, molecular start choice opportunity the and and our We as poultry and they said don't saw also saw products. testing You poultry, to MDS. testing I Salmonella that Salmonella eggs you where meat. going requiring saw had know if system they're the in Listeria testing

move we when So do? now it contract they this continue really that what testing that to Well, USDA drive industry. revenue to were a are testing helps the just deal. further the get we the throughout us to does continue and big they But choice, as isn't of asked, of along that push as really

continue testing. our pathogen with So product MDS we and to like big saw new opportunities in development

we in about, David, talked to As opportunity the reader throughput up the labs. going open high the is

using I'm that labs to with everybody using opportunity high-throughput the don't uses Petri I food, that are The is really for only years ask be talking look dishes that's Petrifilm, not at commercial asking past starting for. X that in lot in to a the First, the to was world lot. thing to for a I Petrifilm. group. but ask general labs,

going So to something group. we're a aspire that I as think that's to

is bringing [indiscernible]. our Petrifilm think risk about if new still think I the manufacturing side, in you risk biggest the

was the We were equipment Now running. We in it's very with it The up, performance in tested results. pleased the team Taiwan. is Taiwan.

off. approved, we've signed So

U.S. down sent and the to we're the breaking going it's over So be equipment, to

we're be track to where on So we on kind to need of right progress. that

people like market that that's unprecedented you the number has had I'd back I McDonald's really me, don't The when haven't customers are too the that saw our you just secondarily, to tough. see here. that know fast growth. to but inflation out I'd if tough in prices And to there. then impact mean seen But revolting still comments, one. it's we've to like see some I And had on an food get high, X I years It's got you've it. --

as a and to segment. business of But a talked that see kind trough stronger bit. of So in the of which through see for Dave a fiscal news I'd going next we going And now that the ease. kind quarters, see like be be to Animal you little but as markets that economics the some we kind our right kind production bit of improve smaller as think will the of as fast could second that we're take to be I'd We not it's little second help half in to of the bit. but eases going like The us a is half, about, in good is part business, the little year the is because Safety. of to growing animal is for

David Naemura

from second part follow maybe say, longer year the and in not I'd say, term, to we capacity then did just the then, in a 'XX, near with course, the I'd on logistics, term. in need order a 'XX, Brandon, we're in faced on the we shipping, challenge near sizable the supply constrained integration where of cash up constraint the of your have we term to shift. question, which resulted XM. in And side our integration,

of fiscal 'XX. And particularly some through, the of that into half first now impact flows

from know is second half. the than being that you first here little we typically lighter a see So around half the

in think range. I XX-XX kind the type historically, of

got in growth second I recapture in constraints. margin quarter to which rates term, of the a and an better with always historically lowest our We'll mostly a amounts 'XX, little impact the see think little half QX, EBITDA compare. some as a shipping We've in share both perspective. and some easier is on of from is that what to revenue second half again, result see near the an then better lighter half first what we'll

put work constraint that, pressure through But supply following we the in 'XX, we recover. So should earlier like did year. we in of that the see as will Petrifilm it

the the I put and this going there's thesis term, remaining longer always the does. that about the talked we've the or to is intact, really -- integration volume. to think intermediate performance end think here. of I P&L day, down it this We've at always that or take. will in P&L talked performance to about this Yes, But come

to for John back able really tackle on growth, getting the is opportunity as I'll unlocks stop So unconstrained being P&L. the to markets what the elaborated there.

Brandon Vazquez

which you EBITDA you Okay. And goal maybe the that $XX to look number? how EBITDA What at the in to pro year a forma things of million get are into a follow delta that getting up on EBITDA? to what $XXX kind going to about time like end $XXX you let's million you it, year there, timing the there, to put a guys were $XX frame, for talk towards want I If guys 'XX there. understand. an talking the incremental without drivers what think previously midpoint, time, of fiscal that do in number guidance call about million get I from take million But at undisclosed up at I the at bridge a is, a out you get EBITDA eventually

David Naemura

Yes. appreciate I Well, that.

able of the that. better underlying EBITDA new then significant accrue that over we think $X think $XXX activities, perspectives as through some need to were levers to We and year, I that efficiency that into we to numbers fall-through the teams I of the We've obviously, we're think improvements noisy million integration organization do lot stated to revenue. billion associated also are also but was territory a over years to as P&L. It in growth. operational a the work to time. with that -- move bringing first, the is I benefits and going continue drive throughout move

that those really strong which very have incrementals shown company to the on can strong including factors Petrifilm, in XM fall-through. products, of X and the it's growth, have So the combination that particular, do the

that in of a integration think and It's aside, To function intact. a the we're time, activities growth. we one function integration financial -- of a that's point, thesis that's play. thesis, aside, timing drive market guiding your post time, we just remains believe year still but only at will that and So the

Brandon Vazquez

Okay. bit a EBITDA me. of the And last low what you and ranges? Dave, baked about the for can one the little revenue high and again, into one maybe guidance talk is end

David Naemura

Sure.

shape we talked supply elaborated -- remarks, look, to all, part customers and John constrained quarters, in the bit. said it of We his I on little a of the there's X.X think And I meaningful implications The the the half to that in recover first for that. we is which shape of our for see that year. at we'll the of First better year.

So say that's points of I a obviously, the have. impact of couple the number in we've But at least would midpoint to a contemplated we with tough guide. that that from estimate, even the data

could worse. fundamentally be that or So better

we also think a not safety spot of now, in soft at market production we're right -- the through in reasonably more the think customers, planning And our food lower worse. we're in assuming safety But We're -- flat. the on that their market. a in better a part cyclical remain we that, little we're difficult end levels, part of look we it's kind the slow cycle. And again, As the or be more cycle, we could animal of reasonably recovery.

So there's market implications.

influencers, share recapture I And share the think or big those plus would implications minus there's think midpoint, the I be here. and Brandon.

Operator

time. further will Adent for no closing John I remarks. questions over this are turn now to at call the There

John Adent

updating us October. quarter on again forward joining Appreciate to first look Great. today, and our you we everyone. Well, call in you thanks,

you. So a Thank summer. have good

Operator

participating and ask you Ladies lines. please and gentlemen, this you your today. that concludes thank your for We conference disconnect call for

Neogen (NEOG) 30 Jul 242024 Q4 Earnings call transcript