EX-99.1 2 neog-ex99_1.htm EX-99.1 EX-99.1

Exhibit 99.1

Neogen Announces Third-Quarter 2024 Results

•
Revenue of $228.8 million.
•
Net loss of $(2.0) million; $(0.01) per diluted share.
•
Adjusted Net Income of $26.4 million; $0.12 per diluted share.
•
Adjusted EBITDA of $52.7 million.
•
Updating full-year outlook.

 

LANSING, Mich., April 9, 2024 – 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."

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 $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.

About Neogen

Neogen 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 Corporation 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.

Source: Neogen Corporation

Contact

Bill Waelke

(517) 372-9200

ir@neogen.com