Neogen Announces Third-Quarter 2024 Results
- Revenue increased by 4.8% to $228.8 million compared to the prior year.
- Adjusted Net Income was $26.4 million, or $0.12 per diluted share.
- Gross margin improved to 51.1% in the third quarter.
- Food Safety segment revenues grew by 4.1% to $157.8 million.
- Animal Safety segment revenues increased by 6.5% to $71.1 million.
- The Company's Genomics business experienced a core revenue decline in the mid-single-digit range.
- Total cash and investments stood at $168.4 million with total outstanding non-current debt of $900.0 million.
- Full-year outlook revised with revenue expected in the range of $910 million to $920 million and Adjusted EBITDA in the range of $210 million to $215 million.
- Operational inefficiencies impacting order fulfillment rates.
- Net loss of $(2.0) million reported for the quarter.
- Core revenue decline in the Company's Genomics business.
- Higher operating expenses affecting Adjusted EBITDA Margin.
- Total outstanding non-current debt of $900.0 million.
- Challenges in meeting end-market demand due to integration issues.
Insights
The reported net loss of Neogen Corporation stands in contrast to the net income achieved in the previous year, which may raise concerns among investors regarding the company's profitability. Despite this, the growth in revenues and gross margin suggests an improvement in sales efficiency, particularly with higher-margin products in the Food Safety segment. The increase in operating expenses, likely tied to the integration of the former 3M Food Safety Division, points to strategic investments that could potentially yield long-term benefits, despite the short-term impact on Adjusted EBITDA Margin.
Investors should also note the company's liquidity position, with a substantial cash reserve and available borrowing headroom, which provides financial flexibility. However, the significant level of non-current debt could be a point of scrutiny, especially in the context of the company's current operational challenges and revised full-year outlook. The capital expenditures forecast, particularly the substantial amount earmarked for integration, indicates a focus on long-term growth but also suggests a significant cash outflow in the near term.
The integration of the former 3M Food Safety business appears to be a strategic move to solidify Neogen's position as a leader in the food safety industry. However, the operational inefficiencies and order fulfillment issues resulting from this process are concerning, as they have led to a downward revision of the full-year revenue outlook. This situation underscores the importance of effective integration strategies and the risks associated with such large-scale endeavors.
From a market perspective, the positive trends in end markets, such as the improvement in unit production volumes and the normalization of channel inventories in Animal Safety, could bode well for future demand. However, the current inability to meet this demand consistently could result in lost sales opportunities and potentially weaken customer confidence. Addressing these inefficiencies swiftly is critical to capitalizing on market opportunities and maintaining competitive advantage.
The transition away from the transition service agreements and the ongoing relocation of product lines are significant operational undertakings. It is not uncommon for such activities to introduce temporary inefficiencies, as seen in Neogen's case. What is critical is the company's approach to managing these inefficiencies and their impact on order fulfillment rates. The company's focus on improving these rates is essential to meeting customer expectations and maintaining service quality.
Moreover, the construction of a new production facility represents a strategic investment in Neogen's operational capabilities. If executed effectively, this could enhance the company's manufacturing efficiency and scalability in the long run. The challenge lies in navigating the short-term disruptions without compromising the long-term operational excellence that is expected from such investments.
- Revenue of
$228.8 million - Net loss of
$(2.0) million $(0.01) - Adjusted Net Income of
$26.4 million $0.12 - Adjusted EBITDA of
$52.7 million - Updating full-year outlook.
"The third quarter saw us complete a number of milestone achievements related to the integration of the former 3M Food Safety business," said John Adent, Neogen's President and Chief Executive Officer. "We completed the relocation of the pathogen detection product line and the initial phases of the relocation of the sample handling product line, which we expect to complete in the fourth quarter. We also completed the exit of the transition service agreements covering back-office functions and distribution. Petrifilm manufacturing will ultimately transition into our new production facility in
Adent continued, "The progress we've made on integration, particularly as it relates to the exit of the transition distribution agreement and the resulting increase in volumes in our primary distribution facility, has created operational inefficiencies that we continue to manage through. We believe these inefficiencies are temporary, but they are currently affecting our order fulfilment rates and preventing us from meeting the end-market demand on a consistent basis, and we are updating our full-year outlook to reflect the lower revenue we now expect to generate. We are encouraged, however, by the continuation of positive trends in our end markets. In Food Safety, sequential improvement in unit production volumes has generally continued across the industry, while channel inventories in Animal Safety have normalized after several quarters of destocking. Our primary focus now is improving our order fulfillment rates to meet the needs of our customers in this improving end-market environment. When we made the strategic decision to expand our scale and solidify our position as the global leader in food safety by merging with the former 3M Food Safety Division, we recognized there would be challenges along the way during the associated carve-out and integration of the business. While we are not pleased with the present level of inefficiencies, we are committed to rectifying them and ultimately realizing the long-term benefits of this combination."
Financial and Business Highlights
Revenues for the third quarter were
Net loss for the third quarter was
Gross margin was
Third-quarter Adjusted EBITDA was
Food Safety Segment
Revenues for the Food Safety segment were
Animal Safety Segment
Revenues for the Animal Safety segment were
On a global basis, the Company's Genomics business experienced a core revenue decline in the mid-single-digit range, reflecting modest sequential improvement from the second quarter. Increased sales in international beef and dairy markets were offset by customer attrition in the
Liquidity and Capital Resources
As of February 29, 2024, the Company had total cash and investments of
Fiscal Year 2024 Outlook
The Company is updating its full-year outlook to reflect a slower-than-anticipated recovery of order fulfillment rates, which are impacting the ability to consistently meet end-market demand. Revenue is now expected to be in the range of
Conference Call and Webcast
Neogen Corporation will host a conference call today at 8:00 a.m. Eastern Time to discuss the Company's financial results. The live webcast of the conference call and accompanying presentation materials can be accessed through Neogen's website at neogen.com/investor-relations. For those unable to access the webcast, the conference call can be accessed by dialing (800) 836-8184 (
About Neogen
Neogen Corporation is committed to fueling a brighter future for global food security through the advancement of human and animal well-being. Harnessing the power of science and technology, Neogen has developed comprehensive solutions spanning the Food Safety, Livestock and Pet Health & Wellness markets. A world leader in these fields, Neogen has a presence in over 140 countries with a dedicated network of scientists and technical experts focused on delivering optimized products and technology for its customers.
Certain portions of this news release that do not relate to historical financial information constitute forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties. Actual future results and trends may differ materially from historical results or those expected depending on a variety of factors listed in Management's Discussion and Analysis of Financial Condition and Results of Operations in the company's most recently filed Form 10-K.
NEOGEN CORPORATION | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Revenue | ||||||||||||||||
Food Safety | $ | 157,754 | $ | 151,542 | $ | 488,435 | $ | 377,528 | ||||||||
Animal Safety | 71,058 | 66,713 | 198,993 | 203,109 | ||||||||||||
Total revenue | 228,812 | 218,255 | 687,428 | 580,637 | ||||||||||||
Cost of revenues | 111,929 | 110,291 | 337,010 | 297,864 | ||||||||||||
Gross profit | 116,883 | 107,964 | 350,418 | 282,773 | ||||||||||||
Operating expenses | ||||||||||||||||
Sales & marketing | 47,920 | 38,598 | 138,535 | 98,329 | ||||||||||||
Administrative | 52,087 | 46,424 | 148,929 | 151,369 | ||||||||||||
Research & development | 4,853 | 7,258 | 17,331 | 18,985 | ||||||||||||
Total operating expenses | 104,860 | 92,280 | 304,795 | 268,683 | ||||||||||||
Operating income | 12,023 | 15,684 | 45,623 | 14,090 | ||||||||||||
Other expense | (17,845) | (17,944) | (53,529) | (43,782) | ||||||||||||
Loss before tax | (5,822) | (2,260) | (7,906) | (29,692) | ||||||||||||
Income tax benefit | (3,800) | (10,450) | (3,900) | (1,250) | ||||||||||||
Net (loss) income | $ | (2,022) | $ | 8,190 | $ | (4,006) | $ | (28,442) | ||||||||
Net (loss) earnings per diluted share | $ | (0.01) | $ | 0.04 | $ | (0.02) | $ | (0.16) | ||||||||
Shares to calculate per share amount | 216,597,777 | 216,399,003 | 216,438,643 | 179,666,118 | ||||||||||||
NEOGEN CORPORATION | ||||||||
February 29, | May 31, 2023 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 161,437 | $ | 163,240 | ||||
Marketable securities | 7,010 | 82,329 | ||||||
Accounts receivable, net of allowance of | 173,592 | 153,253 | ||||||
Inventories, net | 182,390 | 133,812 | ||||||
Prepaid expenses and other current assets | 78,042 | 53,297 | ||||||
Total Current Assets | 602,471 | 585,931 | ||||||
Net Property and Equipment | 272,282 | 198,749 | ||||||
Other Assets | ||||||||
Right of use assets | 15,301 | 11,933 | ||||||
Goodwill | 2,136,338 | 2,137,496 | ||||||
Intangible assets, net | 1,539,744 | 1,605,103 | ||||||
Other non-current assets | 16,356 | 15,220 | ||||||
Total Assets | $ | 4,582,492 | $ | 4,554,432 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Current portion of finance lease | $ | 2,521 | $ | - | ||||
Accounts payable | 89,748 | 76,669 | ||||||
Accrued compensation | 20,305 | 25,153 | ||||||
Income tax payable | 11,573 | 6,951 | ||||||
Accrued interest | 3,438 | 11,149 | ||||||
Deferred revenue | 5,486 | 4,616 | ||||||
Other accruals | 24,773 | 20,934 | ||||||
Total Current Liabilities | 157,844 | 145,472 | ||||||
Deferred Income Tax Liability | 353,853 | 353,427 | ||||||
Non-current debt | 887,653 | 885,439 | ||||||
Other non-current liabilities | 36,968 | 35,877 | ||||||
Total Liabilities | 1,436,318 | 1,420,215 | ||||||
Commitments and Contingencies | ||||||||
Equity | ||||||||
Preferred stock, | — | — | ||||||
Common stock, | 34,657 | 34,599 | ||||||
Additional paid-in capital | 2,579,955 | 2,567,828 | ||||||
Accumulated other comprehensive loss | (29,473) | (33,251) | ||||||
Retained earnings | 561,035 | 565,041 | ||||||
Total Stockholders' Equity | 3,146,174 | 3,134,217 | ||||||
Total Liabilities and Stockholders' Equity | $ | 4,582,492 | $ | 4,554,432 | ||||
NEOGEN CORPORATION | ||||||||
Nine Months Ended February | ||||||||
2024 | 2023 | |||||||
Cash Flows From (For) Operating Activities | ||||||||
Net loss | $ | (4,006) | $ | (28,442) | ||||
Adjustments to reconcile net loss to net cash from operating | ||||||||
Depreciation and amortization | 87,853 | 59,938 | ||||||
Deferred income taxes | 98 | (5,299) | ||||||
Share-based compensation | 9,829 | 7,311 | ||||||
Loss (gain) on disposal of property and equipment | 762 | (472) | ||||||
Amortization of debt issuance costs | 2,581 | 1,860 | ||||||
Impairment of discontinued product lines | — | 2,300 | ||||||
(Gain) loss on sale of minority interest | (74) | 1,516 | ||||||
Change in operating assets and liabilities, net of business | ||||||||
Accounts receivable, net | (16,136) | (47,535) | ||||||
Inventories, net | (48,663) | (656) | ||||||
Prepaid expenses and other current assets | (25,170) | (31,896) | ||||||
Accounts payable and accrued liabilities | 21,386 | (8,422) | ||||||
Interest expense accrual | (7,711) | 3,438 | ||||||
Change in other assets and liabilities | (12,232) | (3,579) | ||||||
Net Cash From (For) Operating Activities | 8,517 | (49,938) | ||||||
Cash Flows (For) From Investing Activities | ||||||||
Purchases of property, equipment and other non-current intangible | (87,167) | (40,253) | ||||||
Proceeds from the maturities of marketable securities | 75,319 | 233,020 | ||||||
Purchases of marketable securities | — | (12,523) | ||||||
Business acquisitions, net of working capital adjustments and cash | — | 13,237 | ||||||
Proceeds from the sale of property and equipment and other | 62 | 682 | ||||||
Net Cash (For) From Investing Activities | (11,786) | 194,163 | ||||||
Cash Flows From (For) Financing Activities | ||||||||
Exercise of stock options and issuance of employee stock purchase | 2,443 | 943 | ||||||
Repayment of long-term debt | — | (100,000) | ||||||
Debt issuance costs paid and other | (444) | (19,276) | ||||||
Net Cash From (For) Financing Activities | 1,999 | (118,333) | ||||||
Effect of Foreign Exchange Rates on Cash | (533) | (3,231) | ||||||
Net (Decrease) Increase In Cash and Cash Equivalents | (1,803) | 22,661 | ||||||
Cash and Cash Equivalents, Beginning of Period | 163,240 | 44,473 | ||||||
Cash and Cash Equivalents, End of Period | $ | 161,437 | $ | 67,134 | ||||
Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, which management believes are useful to investors, securities analysts and other interested parties. Management uses Adjusted EBITDA as a key profitability measure. This is a non-GAAP measure that represents EBITDA before certain items that impact comparison of the performance of our business, either period-over-period or with other businesses. Adjusted EBITDA Margin is Adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.
Management uses Adjusted Net Income as an additional measure of profitability. Adjusted Net Income is a non-GAAP measure that represents net income before certain items that impact comparison of the performance of our business, either period-over-period or with other businesses.
Core revenue growth is a non-GAAP measure that represents net sales for the period excluding the effects of foreign currency translation rates and the first-year impacts of acquisitions and discontinued product lines, where applicable. Core revenue growth is presented to allow for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency translation rates, or the incomparability that would be caused by the impact of an acquisition, disposal or product line discontinuation.
These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP. Please see below for a reconciliation of historical non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.
NEOGEN CORPORATION | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Net (loss) income | $ | (2,022) | $ | 8,190 | $ | (4,006) | $ | (28,442) | ||||||||
Income tax benefit | (3,800) | (10,450) | (3,900) | (1,250) | ||||||||||||
Depreciation and amortization | 29,650 | 27,471 | 87,853 | 59,938 | ||||||||||||
Interest expense, net | 16,673 | 16,820 | 49,508 | 35,844 | ||||||||||||
EBITDA | $ | 40,501 | $ | 42,031 | $ | 129,455 | $ | 66,090 | ||||||||
Share-based compensation | 3,679 | 2,812 | 9,829 | 7,311 | ||||||||||||
FX transaction loss (gain) on loan and other revaluation | 638 | (697) | 1,350 | 5,092 | ||||||||||||
Certain transaction fees and integration costs | 5,451 | 2,890 | 12,090 | 55,754 | ||||||||||||
Restructuring (2) | 938 | — | 3,353 | — | ||||||||||||
Contingent consideration adjustments | (200) | (300) | 250 | (300) | ||||||||||||
ERP expense (3) | 1,701 | — | 3,904 | — | ||||||||||||
Discontinued product line expense | 33 | 3,633 | 53 | 3,633 | ||||||||||||
Loss (recovery) on sale of minority interest | — | 1,516 | (74) | 1,516 | ||||||||||||
Inventory step-up charge | — | (614) | — | 3,245 | ||||||||||||
Adjusted EBITDA | $ | 52,741 | $ | 51,271 | $ | 160,210 | $ | 142,341 | ||||||||
Adjusted EBITDA margin (% of sales) | 23.0 | % | 23.5 | % | 23.3 | % | 24.5 | % | ||||||||
(1) | Net foreign currency transaction loss associated with the revaluation of non-functional currency |
(2) | Includes costs associated with consolidation of |
(3) | Non-capitalizable expenses related to ERP implementation. |
NEOGEN CORPORATION | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Net (loss) income | $ | (2,022) | $ | 8,190 | $ | (4,006) | $ | (28,442) | ||||||||
Amortization of acquisition-related intangibles | 23,266 | 22,680 | 69,685 | 46,637 | ||||||||||||
Share-based compensation | 3,679 | 2,812 | 9,829 | 7,311 | ||||||||||||
FX transaction loss (gain) on loan and other revaluation | 638 | (697) | 1,350 | 5,092 | ||||||||||||
Certain transaction fees and integration costs | 5,451 | 2,890 | 12,090 | 55,754 | ||||||||||||
Restructuring (2) | 938 | — | 3,353 | — | ||||||||||||
Contingent consideration adjustments | (200) | (300) | 250 | (300) | ||||||||||||
ERP expense (3) | 1,701 | — | 3,904 | — | ||||||||||||
Discontinued product line expense | 33 | 3,633 | 53 | 3,633 | ||||||||||||
Loss (recovery) on sale of minority interest | — | 1,516 | (74) | 1,516 | ||||||||||||
Inventory step-up charge | — | (614) | — | 3,245 | ||||||||||||
Other adjustments (4) | — | 1,514 | — | 5,864 | ||||||||||||
Estimated tax effect of above adjustments (5) | (7,046) | (15,095) | (21,446) | (24,864) | ||||||||||||
Adjusted Net Income | $ | 26,438 | $ | 26,529 | $ | 74,988 | $ | 75,446 | ||||||||
Adjusted Earnings per Share | $ | 0.12 | $ | 0.12 | $ | 0.35 | $ | 0.42 | ||||||||
(1) | Net foreign currency transaction loss associated with the revaluation of non-functional currency |
(2) | Includes costs associated with consolidation of |
(3) | Non-capitalizable expenses related to ERP implementation. |
(4) | Income tax expense associated with transaction costs that were recognized as expense in prior |
(5) | Tax effect of adjustments is calculated using projected effective tax rates for each applicable item. |
Contact
Bill Waelke
(517) 372-9200
ir@neogen.com
View original content to download multimedia:https://www.prnewswire.com/news-releases/neogen-announces-third-quarter-2024-results-302111150.html
SOURCE Neogen Corporation
FAQ
What were Neogen 's revenues for the third quarter?
What was Neogen 's net loss for the third quarter?
What was Neogen 's adjusted net income for the third quarter?
What is the full-year revenue outlook for Neogen ?
What is the full-year Adjusted EBITDA outlook for Neogen ?
What are some challenges Neogen is facing currently?
What is impacting the Company's Genomics business?
How much total outstanding non-current debt does Neogen have?
