NEOG - Earnings call transcript Q1 2025

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Operator

Good morning, ladies and gentlemen, and welcome to the Neogen Corporation First Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, October 10, 2024.

I would now like to turn the conference over to Bill Waelke, VP, Investor Relations and Treasury. Please go ahead.

Bill Waelke

Thank you for joining us this morning for the discussion of the first quarter of our 2025 fiscal year. Naemura. non-GAAP our language will CEO, by CFO, the call passing be cover our to over John Dave briefly and before forward-looking the followed I'll Adent, who

our financial Before morning, refer first the the are we with available of will Relations documents measures to believe the both today, our our market we website. presentation quarter as On that well opened we results as Investor section non-GAAP in of which historical within our remarks certain Reconciliations financial published call reminder in measures the Securities in performance. useful forward-looking the evaluating our included non-GAAP earnings Private the presentation, Litigation are our statements that of include will Slide provides Reform and meaning release Act. X this of a

are others, could to statements. that have We statements that forward-looking make forward-looking in by cause those in other risks with among to obligation filings materially we described be our on forward-looking recent SEC. or subject include, matters to and results such risks expressed disclaim update annual XX-K implied from the report different most Form we any in these These actual statements. These

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

John Adent

the X/X company revenue end market the morning, portfolio the supply. the products end of XXXX product of everyone, That Food food as broadest transaction, the to reach approximately our Thanks, help solutions Bill. an closing the the the of that from of we position and we with geographic in call fiscal which our largest generate our where for protect XM X-year Safety welcome Good and market. player food crossed earnings in first year. the September, attractive At and transaction solidified beginning our strengthened and important quarter safety the anniversary of

production a of food and We relatively secular market defense has food distribution contaminants detection rapid of important in number in safety We beverages. believe of line the the and inexpensive the of an provide and tailwinds.

tailwinds requirements these various increase testing of the involves expected in food regulatory One world. the around

of the this example We recently saw U.S. in another

as raw, types. adulterant other focus international and the in With additional USDA's and USDA adulterants and continue food fatalities, regulatory and different and Listeria illness declaration chicken pathogens of Salmonella bodies joining anticipate the other on reducing of stuff we a E.coli in as The the requirements known regulatory products known from pathogen emergence future. breaded in stemming severe food-borne the to

their by beverages, outbreaks. to the obvious food increasing recently the from associated high consuming cost what Other as tragic the include safety unfortunate food food as shelves. consumers products from contaminated is expectation in evidenced or key not product can cost consequences of with litigation, be and tailwinds brand closures know can tremendous, the result the the well in market in And as damage companies and the contaminated associated facility even that of high-profile recalls, several reaching

of These been solutions than value never the have today. expertise, which industry they are occurrences reinforce relevant and proposition more Neogen

our of customers, testing been breadth can expertise number these knowledge and and structuring in products only of have programs. increasing teams commercial but safety not Our food long-standing conversations engaging in with offering the robust services, also an provide the we

market continue is a this factors these in at end lows expect to believe growth our the share. where end some Safety, in progress States, and to and conditions we've safety food cases, expanding In near support We market manage focused. of in United market are made in continuation in or particularly back the segment we most business through to Animal continue we of cyclical the winning

in the in declining XXXX. after in by again XXXX farm net 'XX and which peaking in influenced Our Animal Safety sales declined is U.S. are income

our products the distributors. large The to segment sales distribution of have this grow. in channel And weaker business out majority through of goes our conditions, of continued despite

our However, as other orders levels as in movements and distributor factors timing any of to our partners inventory distributors. subject to well individual the are or sales to initiatives specific

reduced key quarter, inventory due levels quarter. first of fourth distributors from to the the In timing order some our

as others of result specific While in particular experiencing they're their a did so some business. challenges

We not indications in And growth and a our of destocking out the dynamics sales to are trend of the channel coming of monitor in Animal continue support an Safety quarters. we'll believe our products closely. course, seeing rates the improvement the

year-over-year did the revenue the shift quarter business. impact was the in but strategic number business animal we In business began increased pressure towards the animals to lower our quarter. the of companion the offset Genomics driven see the larger side customers. was growth a production weakness of in large quarter of round-trip from improved basis down globally, and saw a first on fourth decline and This inflationary puppies animal new growth by by on in in our We

efficiency beef center we our no are been are producer focused integration also continuing experiencing that segments improvements the respect to ERP-related there. on challenges number opportunity the base been by focus resolved, do in operation, a are while drive see better we the driving With longer We rightsize and in we've initiatives progress, to actions level and the in constrained our being to align of said, and growth have with that to of our primary targeting to current shipping. direct teams cost revenue. the executing dairy distribution to That of on

XM collection we've side, relocation of production the the completed line. sample the former product On

collection to on the reach We quarter. line production normal with which process haven't sight of production, the our While user all ramping quarter. the been third we in sample our in able levels up have lines up the operational keep currently we've to in fully demand been end sales of weighed with

but is and important our the building, process. is new expected several Our in the an new to get Lansing progressing months and moved into uncreate It of milestone the that January. to receipt major in equipment will Petrifilm facility well of is shipments equipment land X of it everything the in first take clearly

recent area encouraging. market shipping we're us, gaining to efforts top a challenges priority. been the response behind The have share as in our initial With this

the known are trusted industry reliable share happen and in focused that validated of the with not products are globally partner in a is most our so supply. recapture leading of will primarily period are but Because overnight, We demonstrated progress line expectations. on this, customers far a and made with we've

to Our customers, a capabilities previously tactical to constructive leading commercial are reliable, our looking detailed as testing with knowledgeable demonstrate forward food source and driving executing that dialogue teams plans impacted continuing solutions. are of we're safety

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

David Naemura

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

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

with seeing half is lowest X%. our At million the The first fiscal of the of lost year prior Safety X% XXXX. in impact growth historically of shipping quarter, this the quarter year's including our our $XXX seasonally were level, a segment in sales segment Food of year, the core the the revenues to in second related of first compared quarter decrease challenges to

was nutritional benefited strong This behind collection a the by own which product well the during up indicator partially and growth was as growth our our offset Petrifilm sample category, decline in core food analysis process growth other led testing, Culture demand of in as line in Media from we as Media. The by quality, product and Culture in ramping fell production facility.

declines offset product The in by modest was pathogens, growth microbiology. which sanitation bacterial saw in and category sanitation and general general

by offset the allergens allergens decline toxins. Within natural category, toxins natural growth was and a in in modest

other Quarterly and category while biosecurity, rodent decline vet and revenues a disposables by supplier-related slight products X% control strong cleaners the includes care growth driven and year in product revenue part core Safety $XX control the core decline, had disinfectants. was core compared decline a The issues. animal offset and Within product were of the had larger in in to million, by quarter. line a prior instruments Animal declines availability segment insect which in product revenue revenue

mid-single down basis. a on digits core revenue Genomics Worldwide was

beef anniversaried by regional categories. end of Solid business The quarter in product the core America, most first perspective, which Growth build-out growth by double-digit Latin was growth saw as was of led a growth new animals of from channel markets growth U.S., key was the continued production performance of the as offset impact away by across shift distribution as mixed. in the driven QX. From wins. some revenue across strong which the with a mostly have inventory was in the small we well

was collection, and by core on Our flat Petrifilm, Media declines sanitation business and in roughly and sample Culture in cleaners growth Genomics. with basis, general Europe vet offset instruments, disinfectants, in a

in offset year-over-year a basis, sanitation. and Asia down Petrifilm, and pathogens revenue Pacific and quality, growth on declines cleaners food disinfective was slightly core with in general by

shipment from Culture had with Canada Our declines U.S. other Petrifilm categories. in region the down Despite in solid delays impact and Safety and largest most last Food saw year which core product impact, growth, the mid-single-digit offset Media by this range. the was revenue carryover

XX.X%, year-over-year that Safety segment, higher points the same Gross costs quarter transaction impacted as and an as mostly from in XX to for onetime products, and XXX other margin XX% due major ago decrease the representing a primarily categories. volume growth rodent In in by points. lower in sequentially well integration-related driven gross product margin the improvement products decline by was was distribution decline costs. offset and items The was strong discontinued the Animal first declines quarter some was basis QX basis reclass the year control in a QX. and Adjusting in continued of

gross the $XX XX.X%, EBITDA EBITDA in decline agreements, which points. some negative an the of of lower revenue decline shipping, and representing full margin higher was year-over-year by Adjusted driven exit with The adjusted a of quarter various to portion EBITDA from basis reflecting the in adjusted in XXX quarter transition expenses. from was the operating additional impact first cost are the decline having impact margin in in including a margin million

adjusted compared $XX quarter, in debt position of declines negative to expenditures, gross net driven by quarter year quarter. capital XX% the notes earnings a per the adjusted fourth primarily lower rate The $X.XX and at million, with to interest senior prior and million. million respectively, a driven and $XXX lower of working $XX position QX on quarter income remains the ended Compared the the share the quarter were higher were current in and first was payment EBITDA. by which million First impact year We total and from semiannual adjusted $X.XX, cash our $XXX capital. of the cash fixed

increase higher running of driven timing which in capital the working payables, we and stock products. was is built where mostly The largest inventory

free the cash point QX guidance in represented We we believe CapEx a the to start high we in year provided are flow off for are with slower spend. on still but the anticipated. we July than had track

our Moving for fiscal guidance. to the outlook our are XXXX previously we maintaining issued year,

revenue quarter regarding first the September, month the in QX. line we are performance first expectations communicated which improvement by was lower-than-normal developed half seasonality an encouraged the with over and saw in of First we we

We by higher margin revenue to of expect adjusted balance the and quarter margin efficiency. in distribution and year our the to actions expense of and the volumes, margin in operating gross lowest including be driven the first year improvement, improvement our EBITDA shipping operations, expect be

our level year, the noted expenditures, anticipate be I by quarter As the first highest capital followed to spending quarter. we second the of on

will working capital EBITDA XM to with for and in load-in higher free being result We combined cash positive. year adjusted believe continue lower also repeating flow the not this CapEx

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

John Adent

part the had to contributions Thanks, a our of attempt has XXXX. integration morning, his and great retire a Doug long calendar the communicated Neogen, we career XM has particularly of Officer this broad across in to shared a Operating to expertise Chief of Doug his Jones, Dave. has a transaction. separate early In value announcement the experience his industries number been and that

the the our and transition Doug's for once for global communications preparation have coming that marketing who assisting will Doug have filled. role me we retirement, organizations. is sales, to With for a Officer, begun search In with and responsibilities report Chief Commercial

as will Vice of closely in transition new other to to report organizations the with Global our Our team Operations, who well has here past. operations Naemura, CFO, as the at President worked Dave Neogen

also more with realignment chain to to a teams This Dave operations provide supply while the our improvement focus opportunities. will untap activities further commercial work on closely and dedicated enabling

recently America long from a Head and season Latin Our multinational also replacement career Carballido, after America announced as of of retirement recently corporations Latin we Enrique most for hired his of Head Neogen, a brings the number space, with the pending Bio in commercial who diagnostics have experience Rad.

solutions a Board. QIAGEN, those Finally, independent the the announced in This CEO Bernard, including leading in molecular safety the Board, to diagnostic current member an valuable prior is provider CEO perspectives insights. company our who recently new of addition industry global experience and insights the a of we of of brings gained of from Thierry our food roles. addition and public

and us to the The in to position have in additions goal experience of these market end safety. puts and continue organizational primary to we realignments on of capabilities our that execute in the significant Neogen best bring opportunities the is food

continuing this We long-term to the to in market to are build on position established drive look that leader sustainable growth. and forward

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

Operator

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

David Westenberg

maybe portfolio. your a this for R&D, et now of at that are little now, food have overall, this you So some and portfolio? in cetera, safety marketing, looking year while in allocation towards and sales overall had with products you've there's toys investments you definitely great new in fit that How the terms XM

David Naemura

David, question. Dave. it's Good

what from a heard think lot post regions. there last I be opportunity. We to a now us of is there. mass have investment, we've the lot you've A And a lot energy commercial out that of we think of couple building been international year particularly things. of the continues putting acquisition, XM critical over

the talk volume R&D about course, as priority for QX, as higher clearly, new It's in. processing. of feeder us heard very invest And reader us an well, to you've exciting in also, a for the And platform. Petrifilm and new announced

And we'll think So you've -- from is heard think very you'll us your continue that exciting. take right. and that I on It's hopefully, I continue theme.

John Adent

that's And of and understand. that's to it. the allocation, products group see David. going our our we're the That's in excited other going behind those put thesis number where to look, continue and of we're right? and products profitability Yes. we to we're money something a it's the And deal. safety, and a deal, thanks, as was continue and of We've the do spend and It a at capital look still we're the to talked about food why lot invest. we really And why to where about going profile money,

David Westenberg

pay you next give right. in debt years, definitely about guidance. sounds over I big to X guys capital down, how debt and priority a think a you, though the But X-year your know on for of basis? pretty of is tuck-ins I X-year, we're That of terms still And then thinking in continue terms priority I debt course ongoing that know you to think the the don't of just about

John Adent

strides I obviously the M&A huge first Look, capital we keep but then we that basis, integration no to reducing done, got vital, up in which consistently talk do frees allocation work change think about so, us heard So getting think net made funding And leverage. XXXX. a is you've integration which capacity, I We the priority, right? there. Yes. as on

progress implies think would leverage year, Xx an the guide ago end year, around we'll be And at clearly than higher the as of we our we little of thought net of okay fiscal a reflective time, path. years here, on The a think the manageable this but I priorities. be and the at few where we years

David Westenberg

And kind Can you. The those customer just well there inning in my one terms them back year pretty group you've say, here. the now Or so a that's have of ratio, winning that win consistent one. the then over pretty Is X basis. you Petrifilm, recovery product that you is are back? you big back? And all when last behind now Perfect. on or to the much about stock of a had out last of still you get talk that all what left last,

John Adent

Yes.

David. Thanks, think I

growth around that's we see is I to growth, return mean And I it's actually major think what for I this. and quarters in had seeing we've business about, of is asked to was we really I strong of -- that X finally back, pieces in and we're had been a think those One which team. a the right? multiple we Japan. mean Japan, there's specifically, where start good you that won issues, turn and story Petrifilm customers decline, us.

done I warehouse regarding a for little couple quarters consistent quarter think rebuild is a back. what remarks, see struggled for at broader it win we to That take bit to and to that to had I've little number us a longer. a us hurt in I on customers. a to opening do want my the the again. we of they bit knew to continues our like we've That's system supply, see need where of they We business going EWM customers customers. focus a that want discussions trust. said with and be And those for

still And the going be and to in the right was that we we're that challenge for that first but for why going lowest journey. to understood to on That's it so going a pace and be we're the think talked about our us, track. on was quarter out year, we we how

Operator

next comes from Brandon question Vazquez Blair. with Your William

Brandon Vazquez

customers Can over you couple us at guys the on, we customer were the start you in to were losses losses you a able were -- past I give touching of know let's all that maybe what John, customer when quantify Japan, quarters? are number. the able on guys you just lost to

you all? quantify if at curious it So can

the come will in back those kind a quarters good losses supply, predominantly accounts, they consistently. I in then see sitting X for if are about when show once a that you minutes sense what just to saying accounts? terms them these getting lost down from you're spend with then what you of talking want And And they that most you're maybe share of they X couple more of of or

David Naemura

Dave. it's Brandon,

quick, real a maybe quantifying little Just bit.

the is we you'll of of entered we we what talked points growth be the As at -- a least headwind a would year. couple thought year, couple about recall, the points of share for

quarter. I that. share saw at, in data million the think -- look how coming And the in was that consistent with share interaction $X the kind in is talk the think U.S. of kind first I'll to of we John was That customer we headwind quarter The along. we and what about globally reasonably this was OUR impact let of the majority first

John Adent

Yes. Thanks, Dave.

customers they I the them, and -- with in way discussion first, no me than frustration, meet able of their not ONE me needs. lot to tell the And a Brian, I to so more right? is, have express were to So there's that want we frustrated their

much Pretty after and the right done we've the are that improvements about talk what we've seen. that, we things

share we a lot in being example. give me into I in energy So our line out We've you on in think of them. and that's when bring ours. integration One years a we And carve MDS. excitement that last under regarding X it the is with to business lot the in what efficiency of good gives I'll and that have is months it roof improvements a was than XM. X time working spent already of

making. efficiency line. to those show now I them can and refocus efforts, efforts increased do. the Neogen customers. is which And them I how show integration of energy I'm them significant excited we're points I the see the the to in MDS. in progress what the I product growth efficiency availability can to show and Petrifilm, starting time starting to that what teams we're the show can team really are from we've

The and the we those us have to the a to the allow continue discussion contract. we of time, that listen, things have it's And then resign discussions. majority are

those the discussions those those that been -- a So are of way progressing. have lot

Brandon Vazquez

range those belt curious the you're now the if maybe you leading gets maybe you there's with guidance just the the Just under any talk quarter with into are Dave, could you ranges the low range And customers X belt point? out having Great. back that X to the high at under and month even of the year. end the you you -- way next knowing and of what on or year. the Okay. and through have the quarter for there to conversations conversations a or this Curious another towards rest for about if one if

John Adent

Yes. Brandon. Thanks,

which and for don't just would the quarter you're markets. uncertainty we se. with month end think that think September, per first I the of I quarter, the first the we broadly timing QX. behind view informs narrow a our first month There's There's QX around for in improvement the yes, versus of of us saw range a pace still and recovery. of it uncertainty share some more

talked being half I set the we exist And we about a here. things when about of think guy, And more we in one still the talked guide so importantly, we weighted. most quarter of this when talked the kind little kind year about second

a XX% makes we So historically, second think half second, first in the volume need bigger. that we'd bit be the creates the maybe more ramp the for see XX% half, and little I to it in a shifting which little weighted,

And we to it hopefully, we we where are. here, little So color I still point, help think can as better. year the develops your a remain

Brandon Vazquez

quick it talk with that impacts so maybe of should could X I'll days call, that throw just there. there point? any you this the in And you, feedback ones at for feeder the from the mind the us just we And past then about out in Southeast. that early in can Petrifilm the any we keep of kind hurricanes share on Dave, is broad John, high-volume Okay. X

John Adent

one have testing it's time anecdotal customer and taking said, that's anecdotal said, no where to only that back." Brandon, "There's and my we take way had we story. it a So it you're I he one it back," story, was "Okay,

has this else, something us been for I as quarter I industry. think if an challenging could add

about with on of have impact had had consumers. X that business, their think devastating you our we've outbreaks major companies relevancy If major

people for had our of a where by, like put to of things and up our to happen. we're United important. And were in goes States. we did the research, do illness doesn't show to what affected And one things job we we died you I'll just the food-borne was that teams sure number the meeting is is it one make our that And we that why tell service tech

we important kind companies had see think A you look when And they a look they do didn't years are until assessments problem. what monitoring forward. to you backwards that's look I and at of why things changing. up, have of continue to a issue While we environmental it's have on risk help to problem lot XXX go customers our to the to these is is continue programs, where these and constantly with these continue rest forward our that because the world for

as -- to have your now we whether never food that continue the environmental to to update, our And more it's risk got to update we're plants it before. wasn't you've that point, all human. are sudden Those it's wasn't assessments help whether flooded It change, protect a customers human, supply.

things So this talk I major need happened we sure want eye quarter, in that make hurricanes. to I'll to X let specifically keep just on. Dave But about the an

David Naemura

quantification the a have in storms Obviously, here Milton pretty don't I Brandon, results of recent of the Yes, are fresh. the South.

keeping an at this logistical time. other don't on this have but and something impacts so And the it's a quantification eye things stage, I at we're

Operator

from question Research. [Operator comes Thomas Instructions] DeBourcy Your Nephron with next

Tom DeBourcy

Can right? hear you all me

David Naemura

DeBourcy, can hear I Yes. Tom you.

Tom DeBourcy

kind weaker creating, Officer maybe to now like where be to period of it that going of have cyclically end your seems ties more a an more I is, of of you time -- But offerings. I customers with been revenue and we're So at position Chief markets around my are kind you're back beating that guess Commercial opportunities, and receptive may out strikes both generation being opportunistic an know of -- I and kind together carved the question existing it's guess, it the role.

And also so and acquisition? but I new customer are of, C-suite guess, both Neogen the terms you that in generation additional role, could revenue how thinking about else what do

John Adent

Yes. that. Great. A thanks, things couple No, of Tom. with

continue focus. his such why Officer to building opportunity that's I here not he the to to able splitting Operating we're a and it Officer And fantastic a Chief see Doug the job role reason team. is did to was out because do we Chief think when that role Commercial because a we're

we a a have Vice very And that has happy board. on tremendous impact. Jim we really, year and us over with Operations of are or really right is to making President around been have year, a strong

running generation. that's And going great him demand gives so and it really hiring us operational fully to on side the someone confidence focus in then

even you, He's those a things done and for and do decade. that For to to I've really the worked retire great he's the wanted of with job. that opportunity Doug team of strong of these to of such a that's and happy allows in is We're over us that the he forward. us way I'm going that he a got the make built allowing planned do types some moves organizational happy a meet business to needs

Tom DeBourcy

or subproducts, capital? guess, there's lower-margin I as a as some business and I products there guess review, the different a of, might cost acquired, at some, on products were it have products you areas portfolio the whether it. kind part you think just some to those the side, like opportunities I of ongoing And about whether looking Got XM overlapping potential also follow-up where exiting are return maybe selling customers, then but maybe consolidation I you're they serve how and good guess, seems

John Adent

something some we've No, some got of right, bar from the Yes. pair that's that with lines it's new not but we already. and that paired XM. that some out I to And went customers worked of we Tom. -- we've mean already we've think in publicized, I the done

We that to have -- have also we with at look but our right? own portfolio,

continue it's capital. the working last today, the told return have year. that's And to on at you looking something we for to anything and we've announce we're continue we And while on been our because focus that to get evaluate something where we that for don't greatest we

now that where return really laser-focused are we sure on us in right the investing we're important allocation now. making the areas is and capital So right for greatest is what

Tom DeBourcy

Africa the focus animal be that Fever Swine whether to animal And last the then years. issues been health, has it's on continued last question. safety the over happening few Geographically, just have a obviously other China maybe or side,

that view do -- growth? That Just of of do the you will kind how for Neogen's me. it importance market for

John Adent

Yes.

strong in I of region in really in is team a for Philippines. the Pacific in more us. We've looking We've strong growth at It a Korea. in a a building out Thailand. in team a whole Japan. strong We're team team -- got got tremendous different We've Asia a think got is China. team opportunity strong strong important in We've lot got a for markets. us the

reliant growth. on just such a been we good has And know, that a has for across such region. and have as China sales broad been because broad mix mix we're you So which not our challenging, China

So internationally talked Asia And market placing earlier, on Dave really we're focusing really we've expand opportunities to share. And all good really have of where our that's low about money for we're international that. because teams regions, those seen as such our Pacific. we

see to we're continue our outside single start about. grow turn seen we've which -- You the corner again, is to Japan, U.S. country which the excited largest market, and

We've see continued significant growth to LatAm. in

invest see in we're North outgrow to growth Europe. those if to going in those We And continue markets. America, continue to to markets continue

Operator

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

John Adent

issues as Again, protect relevancy companies that And the consumers specifically. you've the we of thank U.S. -- talked the this significant food affected very quarter, shows Neogen in supply because for major joining. about, much have like lot to world's have we you saw very a saw we it of

show we the leader to we're space. are So in continuing that the

to their develop innovative new to to their We understand and what risks help and how facilities. within mitigate are customers those solutions those continue

So you again at will thank and next call. you we the very much, see

Operator

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

Neogen (NEOG) 10 Oct 242025 Q1 Earnings call transcript