Full Press Release Details
LANSING, Mich. , April 9, 2024 /PRNewswire/ -- Neogen Corporation (NASDAQ: NEOG ) announced today the results of the third quarter ended February 29, 2024 .
"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 Lansing , the construction and outfitting of which remains on track."
Financial and Business Highlights
Revenues for the third quarter were $228.8 million , an increase of 4.8% compared to $218.3 million in the prior year. Core revenue, which excludes the impacts of foreign currency translation, as well as acquisitions completed and product lines discontinued in the last 12 months, was 6.2%. Acquisitions and discontinued product lines did not impact core growth this quarter, while foreign currency had a negative impact of 1.4%.
Net loss for the third quarter was $(2.0) million , or $(0.01) per diluted share, compared to net income of $8.2 million , or $0.04 per diluted share, in the prior-year period. Adjusted Net Income was $26.4 million , or $0.12 per diluted share, compared to $26.5 million , or $0.12 per diluted share, in the prior-year period, with the decline driven primarily by higher depreciation expense.
Gross margin was 51.1% in the third quarter of fiscal 2024. This compares to a gross margin of 49.5% in the same quarter a year ago, with the increase primarily due to increased sales of higher-margin products in the Company's Food Safety segment.
Third-quarter Adjusted EBITDA was $52.7 million , representing an Adjusted EBITDA Margin of 23.0%, compared to $51.3 million and a margin of 23.5% in the prior-year period. The lower Adjusted EBITDA Margin was driven primarily by higher operating expenses compared to the prior-year period, reflecting additions to accommodate the integration of the former 3M Food Safety Division.
Food Safety Segment
Revenues for the Food Safety segment were $157.8 million in the third quarter, an increase of 4.1% compared to $151.5 million in the prior year, consisting of 5.8% core growth, a 0.2% contribution from acquisitions and discontinued product lines and a negative foreign currency impact of 1.9%. The core revenue growth was led by the Indicator Testing, Culture Media & Other product category, which benefited from higher sales of Petrifilm, as well as sample handling and nutritional analysis products, partially offset by a decline in culture media sales, due primarily to a larger, one-time order in the prior-year period. Within the Natural Toxins & Allergens product category, solid growth in allergens driven by tree nut test kits was partially offset by a decline in sales of natural toxin test kits, due largely to product availability issues. In the Company's Bacterial & General Sanitation product category, growth in sales of general sanitation products was partially offset by a decline in sales of pathogen detection products, largely the result of product availability issues in Latin America and Asia .
Animal Safety Segment
Revenues for the Animal Safety segment were $71.1 million in the third quarter, an increase of 6.5% compared to $66.7 million in the prior year, consisting of 7.0% core growth, a 0.2% headwind from discontinued product lines and negative foreign currency impact of 0.3%. Within the segment, core growth was led by the Company's portfolio of biosecurity products, driven by new business wins and increased demand for cleaners and disinfectants and insect control products. In the Veterinary Instruments & Disposables product category, strong growth was led primarily by increased demand for detectable needles and syringes. The Company's Animal Care & Other product category also experienced strong core revenue growth, due largely to the easing third-party backorder situation in vitamin injectables and higher sales of biologics products.
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 U.S., a result of the shift in strategic focus towards larger production animals.
Liquidity and Capital Resources
As of February 29, 2024 , the Company had total cash and investments of $168.4 million and total outstanding non-current debt of $900.0 million , as well as committed borrowing headroom of $150.0 million .
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 $910 million to $920 million , with Adjusted EBITDA in the range of $210 million to $215 million . The Company continues to expect capital expenditures to be approximately $130 million , including approximately $100 million related specifically to the integration of the former 3M Food Safety Division.
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 (U.S.) or +1 (646) 357-8785 (International) and requesting the Neogen Corporation Third Quarter 2024 Earnings Call. A replay of the conference call and webcast will be available shortly following the conclusion of the call, and can be accessed domestically or internationally by dialing (888) 660-6345 or +1 (646) 517-4150, respectively, and providing the entry code 90261, or through Neogen's Investor Relations website at neogen.com/investor-relations .
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 UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except for share and per share amounts) | ||||||||||||||||
| Three Months Ended February 29/28, | Nine Months Ended February 29/28, | |||||||||||||||
| 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 UNAUDITED CONSOLIDATED BALANCE SHEET (In thousands, except share amounts) | ||||||||
| February 29, 2024 | 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 $4,099 and $2,827 | 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, $1.00 par value, 100,000 shares authorized, none issued and outstanding | — | — | ||||||
| Common stock, $0.16 par value, 315,000,000 shares authorized, 216,607,746 and 216,245,501 shares issued and outstanding at February 29, 2024, and May 31, 2023, respectively | 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 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) | ||||||||
| Nine Months Ended February 29/28, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From (For) Operating Activities | ||||||||
| Net loss | $ | (4,006) | $ | (28,442) | ||||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| 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 acquisitions: | ||||||||
| 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 assets | (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 acquired | — | 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 plan shares | 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 RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (In thousands, except for percentages) | ||||||||||||||||
| Three Months Ended February 29/28, | Nine Months Ended February 29/28, | |||||||||||||||
| 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 (1) | 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 intercompany loans established in connection with the 3M Food Safety transaction and other non- hedged foreign currency revaluation resulting from 3M agreements. |
| (2) | Includes costs associated with consolidation of U.S. genomics labs. |
| (3) | Non-capitalizable expenses related to ERP implementation. |
| NEOGEN CORPORATION RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME (In thousands, except for per share) | ||||||||||||||||
| Three Months Ended February 29/28, | Nine Months Ended February 29/28, | |||||||||||||||
| 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 (1) | 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 intercompany loans established in connection with the 3M Food Safety transaction and other non- hedged foreign currency revaluation resulting from 3M agreements. |
| (2) | Includes costs associated with consolidation of U.S. genomics labs. |
| (3) | Non-capitalizable expenses related to ERP implementation. |
| (4) | Income tax expense associated with transaction costs that were recognized as expense in prior periods. |
| (5) | Tax effect of adjustments is calculated using projected effective tax rates for each applicable item. |
Contact Bill Waelke (517) 372-9200 [email protected]
SOURCE Neogen Corporation