Q2 2021 Neogen Corp Earnings Call
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Thank you growth.
Good morning, and welcome to our regular quarterly conference call for investors and analysts today, we'll be reporting on the second quarter were 2021 fiscal year, which ended on November thirtyth.
As usual some of the statements made here today could be termed as forward looking statements. The statements of course are subject to certain risks and uncertainties. The actual results may differ from those that we discuss today.
The risks associated with our business are covered in part of the company's form 10-K as filed with the Securities and Exchange Commission.
In addition to those of you joining us for lot of telephone conference I also work from those of you joining us really internet.
Following our prepared comments. This morning, we'll entertain questions from participants for joining this conference.
I'm joined this morning for our Chief Financial Officer, Steve Quinlan, the will provide detail on our results for the quarter.
As I said in this mornings press release were pleased to report growth across our businesses during the second quarter, even as we continue to fight global market disruptions caused by the research from COVID-19 pandemic.
Our food safety teams worked extremely hard the very challenging environments. The food industry is still struggling, especially in the restaurant food service sectors Lockdowns on social distancing restrictions are still in place.
Our diversification of continues to be our strengths our deep knowledge of broad product offerings allow us to grow when we face downturns in specific markets in countries.
The will run down the numbers, but we overcame the food safety issues with solid performances from our animal safety division, including a worldwide genomics group and significant sales across our entire product portfolio in global markets. The were not as affected from the pandemic, including China and Australia.
China is still fighting the devastating effects of the African swine fever outbreak has had on the for chemistry. It's the it is estimated that since the start of the outbreak in August of 2018, the China lost 60% of its picks the disease, which amounts of tens of millions of animals.
After the outbreak trend is still by far the largest port producer with an estimated 310 million picks of the 678 million worldwide and 2020.
China is still having outbreaks of losing takes the this deadly disease even today.
Our Neogen China team has worked tirelessly, it's right for the Biosecurity training and infrastructure of trying to help control the spread of the disease. This.
This is the result in significant new sales of disinfect than some of the China.
And then the second quarter over quarter, the sales increase of more than 500 per site, a poor side genomic test as customers begin the long process every populating the herds.
As we had a tough calendar year Neogen has withstood because of our 18000 global employees of stepped up to the unprecedented global challenge.
We could quickly established and continue to take extraordinary measures to protect our business of employees.
I've watched for teams around the world work to ensure a safe and plentiful food supply during the pandemic the.
They deserve all the credit for our success and I couldn't be more proud of the I'm not going to turn it over to Steve the run off the numbers for Steve.
Thanks, John and the welcome to everyone listening this morning early.
Earlier today, we issued a press release announcing the results for our second quarter and year to date periods ending November thirtyth.
Revenues for the quarter were $115 million up seven per cent compared to 107.8 million in the same quarter a year ago.
Net income for the quarter was 15.9 million for 30 cents of share compared to 16.3 million for 31 cents a share a year ago.
The results from the second quarter of the year reflect the almost a million dollars in expenditures on acquisition activities, which did not ultimately come to fruition and that was about a two cents impact to our net earnings.
For the year to date revenues were 224.3 million up 7% over the 209.2 million reported last year net.
Net income for the first six months of fiscal 2021 was 31.7 million or 60 cents a share compared to 30.9 million or 59 cents a share for your go.
Over the next few minutes I'll take you through some of the highlights of our quarter.
Well, we've talked about the impact on our business from currency translations in the past few calls during the second quarter. We continued to be impacted by these fluctuations as compared of revenues would have been 1.2 million higher for the quarter and the neutral currency environment, primarily due to continued weakness in the Brazilian real and the Mexican peso range.
Relative to the U.S. dollar however.
However, the pound and euro for both increased relative to the dollar due to the perceived prospects for an orderly Brexit none of further positive note all of the currencies in which we conduct business did strengthen against the dollar near the end of the quarter.
About $1.7 million of that comparative revenue shortfall is in the food safety segment as the majority of our international businesses reported in through the through the segment. The shortfall was offset by a $500000 currency tailwind in our Australian operations, which reported in through animal safety as the OS.
The dollar strengthened relative to the U.S. dollar.
Revenues for the food safety segment were 57.5 million in the second quarter fiscal 2021, an increase of one per cent compared to 56.9 million in last years second quarter. The.
The food safety segment continues to be impacted by coded related disruptions and slowdowns in some of our important the end markets in the U.S. and Europe, primarily with those customers, which support the restaurant bar another foodservice markets, such as primary schools and universities.
We continue to get nice gains from our Soleris LNG product line, which was introduced in July net gains in this product line were 13% for the quarter.
Our natural toxin product line was flat to the relatively clean harvest in most of our markets.
Our allergen test kits rose, 1% due to sluggish end market demand and competitive pressures.
Corporations and overall business in the third quarter as the country has put more restrictions into place to mitigate it's spread.
Our Brazilian operations rose for percent in local currency with increases across the food safety and genomics portfolio, partially offset by of 900000 dollar sale of insecticides in last year's second quarter, which did not recur of this year and after adjusting for currency translation revenues in Brazil.
By 22%.
Neogen Latino America are of business based in Mexico City had strong 23% growth in the quarter in local currency, primarily on strength and sales of Rodenticides cleaners, disinfectants and genomic services. These gains offset some weakness in our food safety diagnostic kit markets caused by the.
The cold the pandemic.
After adjusting for currency translation of the revenue Green was 13% for the quarter.
Our operations in China recorded of revenue increase of 51% of the local currency driven by strong sales of genomic services to the swine and dairy cattle markets and increase sales of cleaners, and disinfectants to address the ongoing Covid and African swine fever outbreaks in that country.
After adjusting for currency translation revenue grew by 59%.
Or animal safety segment of had a strong second quarter recording revenues of 57 $5 million for for the quarter up 13% compared to the 59 million achieved and last year second quarter.
Animal care products sold out of our Lexington, Kentucky based manufacturing and distribution center, such as small animal supplements wound care and vitamin Injectables increased 22% and vetted instruments, including needles, and syringes rose 17% for the quarter of.
These increases were primarily the result of the increased sales to our largest use distributors due to improving and market demand in the animal protein markets.
Rodenticide sales increased 27 per cent, 24% in the quarter due to continued roden pressure primarily in the Pacific Northwest.
Insecticide revenues rose, 10% for the same period aided by sales from the stand Guard product line, we purchased in July of 2020.
The cleaner disinfectant sales rose for percent for the quarter.
Revenues and our genomics testing in bioinformatics business grew 11% with continued market share gains in the companion animal parentage market's driven by higher levels of spending on our pets and increased penetration in the retail veterinary market.
Commercial beef cattle markets continue to be strong in the us and Australia of beef testing. Marcus. We're also strong is herds of there are being rebuilt after last year's devastating fires.
Worldwide genomics revenues rose, 12% with strong growth in the U S, Australia, and China offset by slower growth in Europe.
Gross margins were 46, 3% for the quarter compared to 47, 3% in last year's second quarter.
The lower margins are due to a shift towards animal safety products, which have gross margins lower than the corporate average. Additionally sales increases within the food safety segment, where from product lines, such as genomics and bio security products, which have lower gross margins then the diagnostic test kits sold in that.
Segment.
For the year to date gross margins are at 46.1% first 47, 4% last year.
Overall operating expenses were up for percent for one of 2 million compared to last year's second quarter Interop, 1% for the year to date.
Of the 1.2 million increase as I mentioned earlier.
About 960000 is do do strategic consulting due diligence and other legal and professional fees for acquisition activities, which ultimately did not come to fruition.
Channel discuss our activity in this area of further in his comments.
Sales and marketing expense expenses decreased 1% for the quarter and they're down for percent for the year to date, primarily from lower trade lower travel trade show in other customer facing activities. The result of continued travel restrictions from the pandemic.
Research and development expense has increased 7% over the prior year as we continue development spending on a number of of products launched in the second quarter or scheduled to be launched in the second half of the year.
Operating income for the second quarter was 19.2 million compared to $18.3 million in last year's second quarter expressed as a percentage of revenues operating income for the quarter was 16.7% compared to 16.9% last year.
We record of 555000 in interest income for the quarter compared to $1.3 million in last year's second quarter.
Rates on our marketable securities investments of dropped from an average of 1.5% last year at this time to about 15 to 20 basis points.
Are effective tax rate for the second quarter was 17.8% compared to 15.3% in last year's second quarter with the increase in rate driven primarily by lower benefit from the exercise of the stock options do the lower exercise activity and lower estimated deductions for for him derived income.
And I'd like to call up some nice working capital improvements, we reduced our accounts receivable balances by for $7 million from the beginning of the fiscal year and improved our day sales outstanding from 68 days that May 31 to 61 days at the end of November at the end of November we've been.
Very focused on customer credit and collections during this pandemic and the results are showing.
Inventory levels at 92 $5 million have declined by two 6 million since year, and we're making progress and continue to work on improving our inventory turns.
We generated 47 and a half million dollars in cash from operations. During the first half of the year and of invested 11, one of that back in property plant and equipment and other assets.
I'll stop now to Echo John comments that we were pleased to report increased revenues across the business in this environment, sometimes staying even can be of wins and the fact that we did achieve growth in both segments with robust growth in the animal safety segment, and new product launches in building momentum and the food safety segment makes the.
US optimistic for the second half of the year.
Are 1800 employees worldwide continue to deliver in difficult operating environment, and we remain proud of their ongoing effort at.
This point I'll turn it back to John for further comments thanks, Steve.
[noise] Neogen continues to lead the world in assuring the safety of the world's food supply I want to expand on Steve's mentioned the during the quarter, we incurred nearly of $1 million of expenses for acquisitions that we ultimately did not win.
We were really excited about those businesses and I thought made very attractive offers to each of the sellers and of while I was disappointed with the outcome I was very pleased with our offers and the work done by the teams.
We continue to have an aggressive corporate development pipeline and I of targets are all stages of the acquisition process. We've expanded our approach and looked it over 90 companies large and small this calendar year, we will continue to be very active in our acquisition strategy and we'll add quality companies and technologies to the Neogen portfolio.
The next quarter to I, just want to tell you I don't they're going to be easy, but I feel very optimistic about neogen future as we movement of 2021 calendar year.
We continue to be well positioned in our growing markets with the right people and products and the organizational strength to reach anywhere in the world where need exists.
We continue to benefit from the now well documented increase of spending on our paths, especially dogs and cats during the Covid era.
Our global genomics operations recently, Mark the first time ever that we've processed at least 500000 samples understandable month, and then they want to get and did it the next month.
That's a huge achievement and we're just getting started giving.
Giving veterinarians and pet owners early information to improve the lives of their pets or of Cain Unwellness test is an absolute game changer.
We continue to lead the digital transformation in the company and the industry after launching our new E Commerce platform for food safety. We saw online orders increased by 29% in December we also expanded our ecommerce capabilities to include genomics and we look forward of great results. If you haven't been to a reps website lately I encourage you to check.
It out it Neogen dot com.
In addition to introducing new products to fight the global pandemic of COVID-19. We've also recently launched from significant new products from R&D pipeline, including our new tests for gluten meat speciation as well as our improved method the test for allergens and food samples.
Our new Soliris next generation, which is an automatic test system that the techs microorganisms continues to have tremendously positive global reaction and as a result of the sales increase of 41% for that technology in the first six months of the year.
As the world against the recover from COVID-19, I'm optimistic about neogen future, we've done exceptionally well through the pandemic and we're going to carry that success forward.
I am sure that you had many questions for us I'm going to stop at this point answer any questions from those of you that of joined the call.
We will now begin the question and answer session Classic of your question you may of plus stars on the one on your Touchtone phone.
Using a speaker phone please pick up your handset before crossing the keys.
So let's draw. Your question. Please press are done too at this time of little pause momentarily to assemble our roster.
Our first question will come from David Westenburg with Guggenheim Securities. Please go ahead.
Hi, Thanks for taking the question and and happy holidays.
The the Neogen nah teams.
And beauty.
So yeah over the years I mean, you've been very decent plan with your acquisitions and I mean, if you look at the multiples you've paid one two times three times revenues historically.
I don't want to use the word.
Not getting disciplined are getting on discipline, because we are in of via <unk>. Now are asset prices are just high across the board and interest rates are low I mean, Steve noted in his remarks that you are getting almost nothing on the cash in the in the in the.
And the bank account now can you talk about maybe where you're valuation frameworks key go I mean, how comfortable do you feel expanding of your multiples to maybe three far from.
From the one to three times sales range of maybe to five times each time of range of just given the increasing competition in the space.
Yeah, David I think Thats of Great question, and you're right I mean.
The or the deals that we've looked at have on.
Really extremely competitive.
And we have put out that I thought were very aggressive and compelling offers and we've there of great offers for the seller and all they need is one person that's a little bit off the reservation on that sort of goes for and so while I thought some of the things we did <unk>.
Lily of war.
Straw offers and really strong from the standpoint of strong for the business and strong.
A little bit strong of the Neogen with historically do ultimately we didn't win it.
On a couple of days.
I think what it's done as of showed US a couple of things. One is we can move very quickly the team for for the performed extremely well in these processes. We have great advisors, we've got a super strong team on this.
So that gave me a lot of confidence to continue to go and look at it in a large and small acquisitions across the world for us to try to get stuff done. So we're going to we're going to get some across the finish line of it's just.
We didn't get some of the ones that we spent some money on.
Alright, and then the meeting.
Just a little bit different away I think historically, because neogen such so integrated from the the day.
<unk> to the to the restaurant you've worked with a lot of small family businesses over the years and you've been able to kind of nurture relationship day at least leads to an acquisition at a fairly decent or or let's say value of multiple when you look at your pipeline.
Acquisitions is are some of those assets maybe in there where you think the.
Hi probability of getting done.
Yes, yeah, you'll see the.
The pipeline has the we have.
We have relationships. So we've cultivated over the last decade, working with different distributors and different partners. We have relationships of where we went out and sought out different technologies and our billing relationship companies that way and we have the traditional auction type processes that we go through so.
Yes, there is all three of those in the in the pipelines today.
Okay, I'm, just gonna ask two more of an and hop back in queue, but I'll talk about you did talked about.
The next couple of quarters are are going to be tough just with the outbreak can you talk about maybe some of the regional sales mix that you've seen in in relationships like COVID-19 outbreaks for example, I mean.
You have customers in the Dakota, as in Wisconsin, and and net area.
And they got hit really hard with the pandemic.
And now as we get deeper into the winter I'm just kind of curious.
Where you think of how we should think about as the pandemic deepens.
What impact that's having using kind of the regional the regions where have you seen it hit hard the hardest.
I was kind of parameter or some sort of gauge yeah, I mean I think it.
It's tough reasonably day, because right now, it's it's everywhere and we're seeing.
And what I mean, my it's going to be tough is operating in this environment is extremely difficult keep.
Keeping your plants open keeping your employees safe keeping your supply chain going making sure of the.
It it's so odd because you don't think about the.
The different pieces I mean.
One of the middle of the pandemic and things are changing and all of a sudden you realize that there is a small plastic part of.
The no one had any.
Sort of recognize that now it's going to be used for COVID-19 testing and now you can't get it.
For a glass vial that we have used for 30 years the.
Now all of a sudden as being.
Taken for another market and you've got to figure out how are you going to do that EMEA constant supply of for 30 years and all of a sudden it starts to get tight.
So that's the challenge none of it's keeping the plants operating and running when you've got so many people that are getting sick and.
And we really pushed in the fall to cuddle to build up excess manpower. So we could keep going.
We've done that the team has performed extraordinarily well, but we have certain locations. When we're in small communities when our community gets it it gets really really difficult.
To continue to to have a constant supply so that's what I mean about.
That in.
It's in addition to the end market.
The the further restrictions put down.
Around restaurants bars and others.
What we're seeing in Europe, I mean, our European team is now or in the last 72 hours non stop because.
You know when we were shipping product out of the U K.
Now Francis said no trucks of coming from the UK for 48 hours.
Well good thing we were planned ahead and we bought the business in Italy of started developing our European operating system, but now that means we've got to move everything that we were shipping of the UK out of Italy. We started planning where you have to build the work we've got to build up inventories of the warehouse.
You know, we hope to have another European site up and running here very shortly so all of these things were doing on a real time basis right and it's it's not only that we of customers that are shutting down but we of vendors that are shutting down and we have supply chain that is being broken and it's just for.
All of these different complexities of the teams are doing.
Every single day to.
To keep our customer supply of of the products they need to keep the world's food supply safe.
So it's.
It is not of I don't think of it I don't think it's like Ah I don't expect bad quarters I am just Tony is going to be really really tough from the team has done a great job of the last ones that we think they're going to do a great job of the next couple of quarters too.
Got it hopefully this will be a shorter short of it yeah.
I feel like I'm, taking up all of everyone's time, so hopefully.
Hopefully the answers shorter when I think of of Neogen and kind of of a long term opportunity I think of that you know the high growth products and in food safety casting like Raptor Liard of Listeria now those kind of products. It was a <unk>. They were muted I think the segment <unk> safety testing was a lot.
Bit muted again this quarter do you still see it as of long term odd, 10% plus grower with margin accretive for the business.
And when can we start see that start to happen.
I think I think you are starting to see a day because I think if you remember as of the last quarter of two quarters ago. The industry was down 11.
And we were flat the industry down this quarter of it was basically down mid single digit. So if the industry is improving of bed and we were up one so we continue to outperform the industry, but I see that food safety market getting <unk>.
Getting a little bit better.
Again, it's tough because if we have all of a sudden we get slammed of more shutdowns.
It just affects across the the the whole segment I mean.
For example, if you think about poultry producers.
The majority of the Fulcher product goes in the restaurants, and when restaurants gets shut down and you just don't need as much chicken as it is.
But it is true right. So that will have an impact not only our food safety of customers, but also our animal safety customers. So.
We need to get the vaccine out there we need to get everybody to get vaccinated, we need to get this economy open on the run it and we're going to be right back up to those numbers when we were used to.
Great. Thank you guys I'll jump back in the queue. Thanks to.
On the next question comes from John Krieger with volume Blair. Please.
Hi, Thanks very much.
Just to follow up on on the.
Last question are you at the given the supply chain of stress are you, having any difficulty filling orders is there sort of of growing backlog.
That we should be thinking about.
We do have some some back order issues.
We are working as hard as we can to to fill those and to make sure that we're.
For helping push customers across I wouldn't.
I wouldn't do it from of modeling standpoint that I can say that we've got Ah it's not Ah.
I wouldn't say, it's material, but it is for us because we hate back orders John we don't like we don't like it when we don't.
Give our customers what they need.
But now we are having some back order challenges because of supply chain issues.
Got it okay. Thanks, and then John within food safety from your perspective as their visibility to get the business growing again.
While we still have COVID-19 or is it just one of these things you are just going to kind of the end of survival mode and more of a flattish until until the virus accounts go down.
No I'm in long.
It's so hard to say right because.
If if if Europe shuts down because of the new variant coming out of the UK, that's going to be really tough.
But I'm optimistic we're going to grow I mean, we grew of this quarter and it was of tough tough quarter I think we're going to grow next quarter too and it's.
<unk>, that's the great thing about in the edge of John is the the team just finds a way to get it done.
Doesn't matter of doesn't matter, but shut down or the logistics or by the team just finds of ways to get done so.
I think we're going to have growth, it's going to be really really tough I hope you guys get the team of little credit because it's not going to be easy, but I think we will.
Great. Thanks.
Steve question for you guys caught out I think some distributor acquisitions and in the last year as well as the stand Guard addition, can you quantify the the impact on revenues from that.
Sure.
For for the year for the quarter the.
Acquisition revenues were about $2 million.
All in and year to date, that's about $3.6 million.
Got it okay. That's.
That's helpful. Thank you and then one more can you give us the breakdown of international versus domestic sales and.
It sounded like the international sales are generally coming in better, but if you could just got quantify that that'd be helpful.
Sure. So international is the percent of the total for the quarter was about 39, 3%.
And for the year to date, the 38, 9% of virtually the same kind of percentage.
Great. Thank you.
Thanks, John.
Our next question will come from Mark Calaway, Let's Stevens. Please go ahead.
Mark you made the muted on your end.
Sorry about the.
John John you talked about the technical details recently ops two questions how much of of that sale will be incremental versus cannibalizing existing sales and the second with the pick up the reporting an embedded instruments I was hoping you could give us some color on that day do you see is coming out of the slump or are you still cause.
Just about about of Alastair.
Yeah, so regarding the the.
Our new.
Patent pending noodles syringe, that's that's going to be what we're trying to do the mark is to continue to defend our leadership position.
With our detectable needles, so I don't know if I'm going to get a big bump of an expansion, but it's going to protect us from when we lose the pattern people doing a knockoff because of our already come over the next generation that's better.
Sure.
Regarding the animal safety I think you're right.
I think the animal safety segment actually was pretty good for the quarter I think the whole market was up mid signal digits.
When you take a look across the industry.
I think.
There's been extreme volatility in the in the dairy of market, which has been tough I mean, the class III fluid milk, one for $15 for $20 back the 15 an.
Eight week period, which is kind of unprecedented because of that milk generally trades between 14 and $16 over the last five years.
But that just shows kind of of the the uncertainty in the market and then at that mill goes to change the production of cheese production was up and then we're exporting.
Derek guys were making money beef guys. We're we're making money are a little bit of breakeven Swan guys were doing well until this month until December and the dropped a little bit below breakeven, but.
I thought the the animal health, especially in the production market.
I thought it firmed up quite a bit and companion looked really good I'm just disappointed I don't have more companion products and that's why we're launching.
O R. Jane Unwellness test, which I'm, just really really excited about.
This test is going to give us the ability that when you bring in the new puppy rather than just doing the parentage test to understand what the dog is that's that's an interesting test. This is going to allow you to understand kind of of what what some of the issues could be with that with the pet going forward right. So.
What are some of the things that from.
From of genetic standpoint.
That.
We can look for a certain types of cancers. We can look for a certain types of things that are going to being affect the dog long term and we can put preventive measures in place to help us address that today.
So.
It includes the risk markers for genetically complex conditions and nobody else has that.
Nobody else has any of them they can do that and so it's going to let the vet be a very active participant of net pet's life with the parent for the whole life of the pet so we.
We just launched that we've got some of that clinics that are already buying it and use of it and so far it's been really well received but nobody else kind of thing like it in the market and that's really cool.
John how the how do you capitalize on that beyond beyond what you just launched.
You've highlighted.
The the companion animal space as the big opportunity for for you.
Think you'll be growing that space, mainly through acquisition or is there a pipeline of products that you're working on the little bit of bold looks so from a pipeline standpoint, <unk> care products going to come back the market here soon which is going to be great for US right. That's one of them, which the non non let's put off the market for a long time now for us for years.
So.
That is a big opportunity for us going forward and that's our own pipeline.
We will look at a lot of different things and.
One of those areas that were looking for for.
Products and to expand our portfolio of through acquisition as of the pet segment.
Okay.
Question for for for Steve.
When we when we look at what's happening with currencies can you talk a little bit about your ability to pass through higher costs and whether the appreciation that we're seeing particularly in Brazil.
Is going to make it harder for you to catch up.
We yeah, I mean, we do pass on the.
Price increases in the markets.
Where we have significant currency movements.
And your question about Brazil.
It's tough no mark because you know when you get like a big 20, plus the evaluation I can't just raise the price of 20 plus percent in the U S dollars does that sort of are based on.
We manage that we do take some price increases.
But we have to be cognizant of of the fact that we're dealing with a lot of different competitors gotta deal with local Brazilian competitors cheap Chinese competitors.
European competitors. So we do of the best we can but we are cognizant of the fact that one of those big currency jumps.
I can't get it all back, but just like when we have a big currency appreciation I don't drop the price by 20 per cent of either.
All right Okay.
Thank you.
Thank you.
The next question will come from David Westenburg with Guggenheim's. The Kennedys. Please go ahead.
I am thank you for taking the follow ups here in terms of just sticking on the acquisition theme are there any concerns with what private equity is doing I know Jimmy of steps kind of say something along the I forgot of saying that it's something like welcome to the industry or something along the lines of that.
I'm, not saying you're intimidated at all by my.
By private equity kind of imitating the did the the the Neogenomics model, but is there would there be any kind of reaction or that you would need to make in terms of either acquisitions that you're making our business strategy.
It's kind of an incoming private equity interest in in in indicating the need Neogen model.
Yeah, I think I think that's a good point.
You know what we looked at what.
But we look at David as we're trying to always look of who are potential competitors what can they do what does it look like so but what we do is we look at the market's we want to participate in and we look at the technologies, we want to participate in and then we go find the best companies that fit that and try to bring him into the portfolio.
And we take a little bit longer term view. So one of the exact of the one of the acquisitions I liked that I really like the last one to private equity.
And so.
What I'm doing is I still like that market. So I will invest in that market, but at the same time I know within three to five years I can buy the business anyway, because we're not going to all of the.
So I'll take a little bit of different approach on it I think they get in there not long term.
We're pretty committed to the markets, we like and we're going to continue to grow those markets and go after them and knowing that the generally short term players and we're looking at the long term of we could probably always add that to the portfolio later.
Got it alright.
Alright, and then just going back to the companion animal market day to day, the how screen diagnostic tastic ear lunch and.
Where you can frame can you frame I saw many many market size growth rates margin impacts in any kind of color you can give us there I realized that the the test is brand new but maybe just some frameworks to help us think about how it can contribute to the both top and bottom line for him.
Trying to remember I think if you want to frame the market.
I don't have the numbers in front of me, David but I think we can get them to the letters how many new puppies are taken in for wellness every year.
So I look at that as there's there's constantly a new set of puppies coming into the market every year. So if you look at that as kind of of the market potential and then multiply that by the size of the by the cost of the test that's kind of how I frame of the market.
Have that right now and.
I can't remember of 80002nd of my head, but that's the way too low I'm trying to remember what it is but we can get that number for ya.
Okay, I think I get someone figure out as he about 80 88 million dogs in the U S.
For that population grows.
Yeah, something around the $8 million I would guess something for pain.
Yeah, that's exactly the value of it the life expectancy being you know 10 years or something okay.
Anyway.
And that was sorry with that was there he is margin accretive business I would say, yes, yes.
Yeah, but Ah for.
Perfect and then you know you have the companion and cleaning products and this is kind of of follow ups at the the previous question you have the companion cleaning products you know how of this health screening I mean, how do you. How do you think about your sales force building out in terms of of of of going after of veterinary markets I know you.
No not a giant and veterinary a sales force, but is there any room to grow that.
And the arrows question, Yeah, there is the internet.
How we're approaching that two of this what this test.
We know the largest.
Multi hospital owners.
And the country, we're going to the first with our with our team as a way to kind of drive the business forward.
For a key accounts teams. So we're absolutely doing exactly what you're talking about.
Got it. Thank you very much and again have a wonderful the next 2021.
Thanks for the 2020.
Yeah.
Again, if you'd like to ask the question today. It has started then one star.
Started then one task of the question.
The being no further questions. This will conclude our question and answer session I would like to turn the conference back over to John eight Hunt for any closing remarks.
Thank you grant now I just want to close by wishing you and all of your families of very happy holidays and <unk>.
Really looking for and I hope we have a fantastic 2021. So thank you everyone and thank you for your support in Asia.
The conference has now concluded. Thank you for attending today's presentation may now disconnect.