- Revenue of $229.0 million, an
increase of 73.0% over the prior-year quarter.
- Net income of $1.5 million;
$0.01 per diluted share.
- Adjusted Net Income of $23.7
million; $0.11 per diluted
share.
- Adjusted EBITDA of $52.4 million,
an increase of 93.8% over the prior-year quarter, at a margin of
22.9%.
LANSING,
Mich., Oct. 10, 2023 /PRNewswire/ -- Neogen
Corporation (NASDAQ: NEOG) announced today the results of the first
quarter ended August 31, 2023.
"Our performance in the quarter was generally in line with our
expectations," said John Adent,
Neogen's President and Chief Executive Officer. "Our legacy Food
Safety business performed well, particularly in our core product
lines of allergen, natural toxin and microbiological testing. The
Animal Safety business experienced continued destocking, as
anticipated, with channel inventory levels reaching multi-year
lows. Pro forma growth in the former 3M Food Safety Division was low, impacted by the
strong fourth quarter that saw us catch up on fulfillment and also
by weakness in China, but the
progress we made last quarter on Petrifilm supply at our transition
manufacturing partner was sustained and initial demand in the
second quarter has been encouraging. Our teams are leveraging this
supply continuity, as well as the broader Neogen product portfolio,
in targeted demand-generation initiatives."
Adent continued, "We made significant progress in the quarter
across a number of fronts related to the integration of the former
3M Food Safety division, moving
closer to full autonomy of that business within the One Neogen we
are building. We have additional key integration activities
underway and remain on track for the third-quarter relocation of
two product lines and exit of two transition agreements, and the
construction of our new facility in Lansing is progressing well. With our combined
commercial and technical teams approaching one year of working
together on the product portfolio, we are excited about the
momentum that's building and remain as optimistic as ever regarding
the future of the business."
Financial and Business Highlights
Revenues for the first quarter were $229.0 million, an increase of 73.0% compared to
$132.3 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, declined 1.3%. Acquisitions and
discontinued product lines contributed 73.5% to revenue growth,
while foreign currency added 0.8%.
Net income for the first quarter was $1.5
million, or $0.01 per diluted
share, compared to $5.2 million, or
$0.05 per diluted share, in the
prior-year period. The decrease in net income was driven primarily
by interest expense and the amortization of acquisition-related
intangibles, all related to the merger with the former 3M Food Safety Division completed on September 1, 2022, partially offset by
incremental revenues from the merger, which generated margins
higher than the legacy company average margins. Adjusted Net Income
was $23.7 million, or $0.11 per diluted share, compared to $17.6 million, or $0.16 per diluted share, in the prior-year
period. Higher Adjusted EBITDA drove the increase in Adjusted Net
Income, more than offsetting the increase in interest expense. On a
per-share basis, Adjusted Net Income was lower by $0.05 in the first quarter compared to the
prior-year period, a result of the increase in shares outstanding
related to the 3M Food Safety
transaction.
Gross margin was 51.0% in the first quarter of fiscal 2024. This
compares to a gross margin of 47.0% in the same quarter a year ago,
with the increase primarily due to higher gross margins generated
by incremental revenues from the former 3M Food Safety Division.
First-quarter Adjusted EBITDA was $52.4
million, representing an Adjusted EBITDA Margin of 22.9%,
compared to $27.0 million and a
margin of 20.4% in the prior-year period. The margin expansion was
primarily driven by the increase in gross profit, which more than
offset a non-recurring billing adjustment from the Company's
transition manufacturing partner and operating expenses added
during the quarter to accommodate the expanded scale of the
business.
Food Safety Segment
Revenues for the Food Safety segment were $166.3 million in the first quarter, an increase
of 157.2% compared to $64.6 million
in the prior year, consisting of 4.5% core growth, 150.7% from
acquisitions and discontinued product lines and a foreign currency
benefit of 2.0%. Core revenue growth was led by the Bacterial &
General Sanitation product category, which benefited from new
microbiological testing business in the U.S. and the U.K., and by
solid growth in the Natural Toxins & Allergens product
category. The Indicator Testing, Culture Media & Other product
category experienced a core revenue decline, driven primarily by
international distributor ordering patterns for food quality and
nutritional analysis products.
Animal Safety Segment
Revenues for the Animal Safety segment were $62.7 million in the first quarter, compared to
$67.7 million in the prior year's
first quarter, consisting of a 6.7% core revenue decline, a 0.3%
headwind from discontinued product lines and negative foreign
currency impact of 0.4%. The core revenue decline was driven by the
Veterinary Instruments & Disposables product category, which
experienced continued destocking by large veterinary distributors,
and the Animal Care & Other product category, which had lower
sales of small-animal supplements and vitamin injectables, due in
part to supply constraints. These decreases were partially offset
by growth in the Rodent Control, Insect Control and Cleaners &
Disinfectants product category.
The Company's worldwide genomics business declined modestly in
the quarter, with strength in sheep and beef testing in
Australia and new business in beef
markets in the U.K. and Brazil
offset by decreases in porcine and poultry testing, due to the
attrition of two large domestic customers.
Liquidity and Capital Resources
As of August 31, 2023, the Company
had total cash and investments of $239.3
million and total outstanding debt of $900.0 million, as well as committed borrowing
headroom of $150.0 million.
Fiscal Year 2024 Outlook
Taking into account first-quarter results, as well as typical
seasonality of revenue and the expectation of an improved
end-market environment in the second half of the year, the Company
continues to anticipate fiscal year 2024 revenue between
$955 million and $985 million, while Adjusted EBITDA continues to
be expected in a range of $235
million to $255 million. The
Company also 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 (844) 757-5681 (U.S.) or +1 (412) 317-5297
(International) and requesting the Neogen Corporation First Quarter
FY24 Earnings Call (Conference ID: 10182677). 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 (877) 344-7529 or +1 (412) 317-0088,
respectively, and providing the entry code 6567809, 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 INCOME (In thousands, except for
per share)
|
|
|
|
Three Months Ended
August 31,
|
|
|
|
2023
|
|
|
2022
|
|
Revenue
|
|
|
|
|
|
|
Food Safety
|
|
$
|
166,278
|
|
|
$
|
64,643
|
|
Animal
Safety
|
|
|
62,709
|
|
|
|
67,706
|
|
Total
revenue
|
|
|
228,987
|
|
|
|
132,349
|
|
Cost of
revenues
|
|
|
112,226
|
|
|
|
70,079
|
|
Gross profit
|
|
|
116,761
|
|
|
|
62,270
|
|
Operating
expenses
|
|
|
|
|
|
|
Sales &
marketing
|
|
|
45,783
|
|
|
|
23,383
|
|
Administrative
|
|
|
45,121
|
|
|
|
27,944
|
|
Research &
development
|
|
|
6,722
|
|
|
|
4,881
|
|
Total operating
expenses
|
|
|
97,626
|
|
|
|
56,208
|
|
Operating
income
|
|
|
19,135
|
|
|
|
6,062
|
|
Other (expense)
income
|
|
|
(17,472)
|
|
|
|
597
|
|
Income before
tax
|
|
|
1,663
|
|
|
|
6,659
|
|
Income tax
|
|
|
160
|
|
|
|
1,450
|
|
Net
income
|
|
$
|
1,503
|
|
|
$
|
5,209
|
|
Net income per
diluted share
|
|
$
|
0.01
|
|
|
$
|
0.05
|
|
Shares to calculate per
share amount
|
|
|
216,846,106
|
|
|
|
107,857,477
|
|
NEOGEN CORPORATION UNAUDITED
CONSOLIDATED BALANCE SHEET (In thousands)
|
|
|
|
August 31,
2023
|
|
|
May 31,
2023
|
|
Assets
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
178,832
|
|
|
$
|
163,240
|
|
Marketable
securities
|
|
|
60,424
|
|
|
|
82,329
|
|
Accounts receivable,
net of allowance of $3,205 and $2,827
|
|
|
137,669
|
|
|
|
153,253
|
|
Inventories,
net
|
|
|
140,692
|
|
|
|
133,812
|
|
Prepaid expenses and
other current assets
|
|
|
66,176
|
|
|
|
53,297
|
|
Total Current
Assets
|
|
|
583,793
|
|
|
|
585,931
|
|
Net Property and
Equipment
|
|
|
221,090
|
|
|
|
198,749
|
|
Other Assets
|
|
|
|
|
|
|
Right of use
assets
|
|
|
14,505
|
|
|
|
11,933
|
|
Goodwill
|
|
|
2,137,602
|
|
|
|
2,137,496
|
|
Intangible assets,
net
|
|
|
1,588,066
|
|
|
|
1,605,103
|
|
Other non-current
assets
|
|
|
16,049
|
|
|
|
15,220
|
|
Total Assets
|
|
$
|
4,561,105
|
|
|
$
|
4,554,432
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
Current portion of
finance lease
|
|
$
|
2,642
|
|
|
$
|
-
|
|
Accounts
payable
|
|
|
90,210
|
|
|
|
76,669
|
|
Accrued
compensation
|
|
|
14,863
|
|
|
|
25,153
|
|
Income tax
payable
|
|
|
5,399
|
|
|
|
6,951
|
|
Accrued
interest
|
|
|
3,438
|
|
|
|
11,149
|
|
Deferred
revenue
|
|
|
3,789
|
|
|
|
4,616
|
|
Other
accruals
|
|
|
17,789
|
|
|
|
20,934
|
|
Total Current
Liabilities
|
|
|
138,130
|
|
|
|
145,472
|
|
Deferred Income Tax
Liability
|
|
|
354,792
|
|
|
|
353,427
|
|
Non-current
debt
|
|
|
886,177
|
|
|
|
885,439
|
|
Other non-current
liabilities
|
|
|
35,831
|
|
|
|
35,877
|
|
Total
Liabilities
|
|
|
1,414,930
|
|
|
|
1,420,215
|
|
Commitments and
Contingencies (note 12)
|
|
|
|
|
|
|
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,
216,310,582 and 216,245,501 shares issued and outstanding at August
31,
2023, and May 31, 2023, respectively
|
|
|
34,610
|
|
|
|
34,599
|
|
Additional paid-in
capital
|
|
|
2,571,517
|
|
|
|
2,567,828
|
|
Accumulated other
comprehensive loss
|
|
|
(26,496)
|
|
|
|
(33,251)
|
|
Retained
earnings
|
|
|
566,544
|
|
|
|
565,041
|
|
Total Stockholders'
Equity
|
|
|
3,146,175
|
|
|
|
3,134,217
|
|
Total Liabilities and
Stockholders' Equity
|
|
$
|
4,561,105
|
|
|
$
|
4,554,432
|
|
NEOGEN CORPORATION UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands)
|
|
|
|
Three Months Ended
August 31,
|
|
|
|
2023
|
|
|
2022
|
|
Cash Flows From (For)
Operating Activities
|
|
|
|
|
|
|
Net income
|
|
$
|
1,503
|
|
|
$
|
5,209
|
|
Adjustments to
reconcile net income to net cash from operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
28,734
|
|
|
|
5,729
|
|
Deferred income
taxes
|
|
|
998
|
|
|
|
(1,439)
|
|
Share-based
compensation
|
|
|
2,638
|
|
|
|
1,867
|
|
Amortization of debt
issuance costs
|
|
|
860
|
|
|
|
—
|
|
Change in operating
assets and liabilities, net of business acquisitions:
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
|
16,242
|
|
|
|
4,819
|
|
Inventories
|
|
|
(6,304)
|
|
|
|
(8,330)
|
|
Prepaid expenses and
other current assets
|
|
|
(12,925)
|
|
|
|
(14,682)
|
|
Accounts payable and
accrued liabilities
|
|
|
4,980
|
|
|
|
(13,278)
|
|
Interest expense
accrual
|
|
|
(7,711)
|
|
|
|
—
|
|
Change in other assets
and liabilities
|
|
|
(6,006)
|
|
|
|
5,962
|
|
Net Cash From (For)
Operating Activities
|
|
|
23,009
|
|
|
|
(14,143)
|
|
Cash Flows (For) From
Investing Activities
|
|
|
|
|
|
|
Purchases of property,
equipment and other non-current intangible assets
|
|
|
(30,630)
|
|
|
|
(12,996)
|
|
Proceeds from the
maturities of marketable securities
|
|
|
21,905
|
|
|
|
108,488
|
|
Purchases of
marketable securities
|
|
|
—
|
|
|
|
(12,523)
|
|
Proceeds from the sale
of property and equipment and other
|
|
|
41
|
|
|
|
—
|
|
Business acquisitions,
net of working capital adjustments and cash acquired
|
|
|
—
|
|
|
|
(1,331)
|
|
Net Cash (For) From
Investing Activities
|
|
|
(8,684)
|
|
|
|
81,638
|
|
Cash Flows From
Financing Activities
|
|
|
|
|
|
|
Exercise of stock
options and issuance of employee stock purchase plan
shares
|
|
|
1,062
|
|
|
|
905
|
|
Net Cash From Financing
Activities
|
|
|
1,062
|
|
|
|
905
|
|
Effect of Foreign
Exchange Rates on Cash
|
|
|
205
|
|
|
|
5,775
|
|
Net Increase In Cash
and Cash Equivalents
|
|
|
15,592
|
|
|
|
62,625
|
|
Cash and Cash
Equivalents, Beginning of Period
|
|
|
163,240
|
|
|
|
44,473
|
|
Cash and Cash
Equivalents, End of Period
|
|
$
|
178,832
|
|
|
$
|
107,098
|
|
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
August 31,
|
|
|
|
2023
|
|
|
2022
|
|
Net
income
|
|
$
|
1,503
|
|
|
$
|
5,209
|
|
Provision for income
taxes
|
|
|
160
|
|
|
|
1,450
|
|
Depreciation and
amortization
|
|
|
28,734
|
|
|
|
5,729
|
|
Interest expense
(income), net
|
|
|
16,666
|
|
|
|
(969)
|
|
EBITDA
|
|
$
|
47,063
|
|
|
$
|
11,419
|
|
Share-based
compensation
|
|
|
2,638
|
|
|
|
1,867
|
|
FX transaction gain on
loan revaluation (1)
|
|
|
(290)
|
|
|
|
—
|
|
Certain transaction
fees and integration costs
|
|
|
1,951
|
|
|
|
13,732
|
|
Restructuring
|
|
|
559
|
|
|
|
—
|
|
Contingent
consideration adjustments
|
|
|
300
|
|
|
|
—
|
|
ERP expense
(2)
|
|
|
128
|
|
|
|
—
|
|
Discontinued product
line expense
|
|
|
20
|
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
52,369
|
|
|
$
|
27,018
|
|
Adjusted EBITDA margin
(% of sales)
|
|
|
22.9
|
%
|
|
|
20.4
|
%
|
Adjusted EBITDA
increase
|
|
|
93.8
|
%
|
|
|
|
|
|
(1)
|
Net foreign currency
transaction gain associated with the revaluation of non-functional
currency intercompany loans established in connection with 3M Food
Safety transaction.
|
(2)
|
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
August 31,
|
|
|
|
2023
|
|
|
2022
|
|
Net
income
|
|
$
|
1,503
|
|
|
$
|
5,209
|
|
Amort of
acquisition-related intangibles
|
|
|
23,325
|
|
|
|
1,841
|
|
Share-based
compensation
|
|
|
2,638
|
|
|
|
1,867
|
|
FX transaction gain on
loan revaluation (1)
|
|
|
(290)
|
|
|
|
—
|
|
Certain transaction
fees and integration costs
|
|
|
1,951
|
|
|
|
13,732
|
|
Restructuring
|
|
|
559
|
|
|
|
—
|
|
Contingent
consideration adjustments
|
|
|
300
|
|
|
|
—
|
|
ERP expense
(2)
|
|
|
128
|
|
|
|
—
|
|
Discontinued product
line expense
|
|
|
20
|
|
|
|
—
|
|
Estimated tax effect of
above adjustments (3)
|
|
|
(6,447)
|
|
|
|
(5,093)
|
|
Adjusted Net
Income
|
|
$
|
23,687
|
|
|
$
|
17,556
|
|
Adjusted Earnings
per Share
|
|
$
|
0.11
|
|
|
$
|
0.16
|
|
|
|
(1)
|
Net foreign currency
transaction gain associated with the revaluation of non-functional
currency intercompany loans established in connection with 3M Food
Safety transaction.
|
(2)
|
Non-capitalizable
expenses related to ERP implementation.
|
(3)
|
Tax effect of
adjustments is calculated using projected effective tax rates for
each applicable item.
|
Contact
Bill Waelke
(517) 372-9200
ir@neogen.com
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SOURCE Neogen Corporation