Q2 2024 Neogen Corporation Earnings Call
Good day and welcome to the Neogen Corporation Second Quarter 2024 Earnings Conference Call. All participants will begin on
Good day and welcome to the Mansion Corporation second quarter 2024 earnings Conference call.
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I would now like to turn the conference over to Bill Welke, head of investor relations and treasury. Please go ahead.
I would now like to turn the conference over to Bill Walton and of Investor Relations and Treasury. Please go ahead.
Bill Welke: Thank you for joining us today for the discussion of the second quarter of our 2024 fiscal year. I'll briefly cover the non-GAAP and forward-looking language before passing the call over to our CEO , John Aydins, who will be followed by our CFO , Dave Nymura.
Thank you for joining us today for the discussion of the second quarter of our 'twenty 'twenty four fiscal year <unk>.
I'll briefly cover the non-GAAP and forward looking language before passing the call over to our CEO, John agents, who will be followed by our CFO David <unk>.
Bill Welke: Before the market opened today, we published our second quarter results, as well as a presentation with both documents available in the investor relations section of our website.
Before the market opened today, we published our second quarter results as well as the presentation with both documents are available in the Investor Relations section of our website.
Bill Welke: On our call today, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance.
On our call today, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance.
Bill Welke: Reconciliations of historical non-GAAP financial measures are included in our earnings release and the presentation, slide two of which provides a reminder that our remarks will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
Reconciliations of historical non-GAAP financial measures are included in our earnings release and the presentation.
Two of which provides a reminder that our remarks will include forward looking statements within the meaning of the private Securities Litigation Reform Act.
Bill Welke: These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward-looking statements.
These forward looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward looking statements.
Bill Welke: These risks include, among others, matters that we have described in our most recent annual report on Form 10-K and in other filings we make with the SEC.
These risks include among others.
Matters that we have described in our most recent annual report on Form 10-K and in other filings, we make with the SEC we.
Bill Welke: We disclaim any obligation to update these forward-looking statements. With that, I'll turn things over to John .
We disclaim any obligation to update these forward looking statements with that I'll turn things over to John.
Thanks Bill.
John Aydins: Good morning, everyone, and welcome to our earnings call covering the second quarter of our 2024 fiscal year.
Good morning, everyone and welcome to our earnings call covering the second quarter of our 2020 for fiscal year.
John Aydins: This is an exciting time in Neogen as we're approaching several near-term milestones on the journey of integrating the former 3M food safety business.
This is an exciting time at Neogen as we're approaching several near term milestones on the journey of integrating the former three I'm food safety business.
John Aydins: Following the launch of our new ERP system in September , we made further progress by initiating the exit of several transition service agreements that we have with 3M, while continuing to ramp up our internal.
Following the launch of our new ERP system in September we made further progress by initiating the exit of several transition service agreements that we have with three out.
While continuing to ramp up our internal capabilities.
John Aydins: On the manufacturing front, we also successfully completed the first phase of the relocation of the former 3M pathogen and sample handling product lines in the Neogen facilities.
On the manufacturing front. We also successfully completed the first phase of the relocation of the former three M pathogen and sample handling product lines Indonesian facilities.
John Aydins: The final relocation of the sample handling production we now expect to complete in Q4, but otherwise remain on track to exit all transition agreements outside of Petrie from manufacturing by the end of the third quarter.
The final relocation of the sample handling production, we now expect to complete in Q4, but otherwise remain on track to exit all transition agreements outside of Petri from manufacturing by the end of the third quarter.
John Aydins: Moving to our results for the quarter. They were in line with the expectations we communicated on our last earnings call with second quarter revenue and adjusted EBITDA margin modestly ahead of the first quarter.
Moving to our results for the quarter. They were in line with the expectations. We communicated on our last earnings call with second quarter revenue and adjusted EBITDA margin modestly ahead of the first quarter.
John Aydins: The backlog of open orders we mentioned on our last earnings call remained at the end of the second quarter, primarily affecting legacy Neogen food safety products and negatively impacting our core revenue growth by approximately 3 to 400 basis points.
The backlog of open orders, we mentioned on our last earnings call remained at the end of the second quarter, primarily affecting legacy Neogen food safety products and negatively impacting our core revenue growth by approximately three to 400 basis points.
John Aydins: We are encouraged by the orders we have in hand and are prioritizing working through the current backlog.
We are encouraged by the orders where you are in hand and are prioritizing working through the current backlog.
John Aydins: In our food safety segment, while core revenue grew modestly, it would have been up in the mid-single-digit range, absent the elevated open-order backlog.
And our food safety segment, where core revenue grew modestly it would've been up in the mid single digit range absent the elevated open order backlog.
John Aydins: We experienced solid growth in petrochrome compared to the prior year, and we saw an acceleration in Asia Pacific from the first quarter, with Japan and China showing improvement through a combination of winning back and replacing share that was lost due to historical inconsistencies in supply from our transition manufacturing partner.
We experienced solid growth in future phone compared to the prior year and we saw an acceleration in Asia Pacific from the first quarter, what Japan, and China, showing improvement through a combination of winning back and replacing share that was lost due to historical inconsistency is in supply from our transition manufacturing partner.
John Aydins: The strongest performance in food safety came in pathogen detection, where we leveraged the complementary neogen and 3M microbiological capabilities to win new business in a core product category where we see significant growth opportunities.
The strongest performance in food safety came in pathogen detection, where we leverage the complimentary neogen and three am microbiological capabilities to win new business in our core product category, where we see significant growth opportunities.
In our animal safety segment, the distributor Destocking, we've been experiencing moderated in the quarter.
John Aydins: In our animal safety segment, the distributor de-stocking we've been experiencing moderated in the quarter.
Inventory levels in the channel remained low but the overall destocking was at a reduced rate.
John Aydins: Inventory levels in the channel remain low, but the overall stock was at a reduced rate.
John Aydins: Excluding genomics, where sales do not go through distribution, core growth in animal safety saw a nice improvement from Q1, with the rate of decline in Q2 improving by 400 basis points.
Excluding genomics, where sales go through distribution core growth in animal safety saw a nice improvement from Q1 with the rate of decline in Q2, improving by 400 basis points.
John Aydins: In genomics, we are seeing some incremental headwinds from the strategic shift to focus to larger, more profitable production animals, as well as companion animals.
And genomics, where you're seeing some incremental headwinds from the strategic shift to focus to larger more profitable production animals as well as companion animals.
John Aydins: Although the environment remains dynamic, we are encouraged by the signs of improvement we've seen in our end markets.
Although the environment remains dynamic we are encouraged by the signs of improvement we've seen in our end markets and.
John Aydins: in addition to the moderating, de-stocking, and animal safety.
In addition to the moderating destocking in animal safety.
John Aydins: The end-user demand backdrop remains stable for the first quarter.
The end user demand backdrop remains stable for the first quarter.
John Aydins: On the food safety side, inflation is beginning to ease, albeit slowly, and there is a general view that a continuation of this trend will lead to volume inflection for food producers in calendar 2024.
On the food safety side inflation is beginning to ease, albeit slowly and there is a general view that a continuation of this trend will lead the volume inflection for food producers in calendar 'twenty 'twenty four.
John Aydins: We view these as positive developments, but with the greater visibility the first half of the year now affords us, we believe these improvements are happening at a slower pace than our full year outlook had originally contemplated.
We view these as positive developments, but with the greater visibility to the first half of the year now affords us. We believe these improvements are happening at a slower pace than our full year outlook you had originally contemplated.
John Aydins: Accordingly, we are updating our full-year outlook to reflect the current view of these impacts, including the strategic shift underway in our genomics business.
Accordingly, we are updating our full year outlook to reflect the current view of these impacts including the strategic shift underway in our genomics business.
John Aydins: With the largest external challenges we've been experiencing seemingly beginning to stabilize, our focus remains on the value creation opportunity we have through continued progress on the integration of the former 3M food safety business.
With the largest external challenges we've been experiencing seemingly beginning to stabilize our focus remains on the value creation opportunity. We have through continued progress on the integration of the former three on food safety business, while positioning ourselves to capitalize on an improved end market environment.
John Aydins: while positioning ourselves to capitalize on an improved end market environment.
John Aydins: Now I'll turn it over to Dave for some more insights into our results for the quarter.
Now I'll turn it over to Dave for some more insights into our results for the quarter.
Dave Nymura: Thank you, John . And welcome to everyone on the call today. Jumping into the results, our second quarter revenues were $230 million, essentially flat compared to the same quarter a year ago.
Thank you John and welcome to everyone on the call today jumping into the results. Our second quarter revenues were 230 million essentially flat compared to the same quarter a year ago core.
Dave Nymura: Core revenue, which excludes the impact of foreign currency, acquisitions, and discontinued product lines, declined just under 1% for the quarter. Acquisitions and discontinued product lines added a net 20 basis points, while foreign currency contributed 50 basis points compared to the prior year.
Core revenue, which excludes the impact of foreign currency acquisitions and discontinued product lines declined just under 1% for the quarter acquisitions and discontinued product lines added a net 20 basis points, while foreign currency contributed 50 basis points compared to the prior year.
Dave Nymura: Notably, we passed the one year anniversary of the 3M food safety transaction on the first day of our second quarter. And accordingly, those revenues are now included in our core growth.
Notably we passed the one year anniversary of the three of them food safety transaction on the first day of our second quarter and Accordingly. Those revenues are now included in our core growth.
Moving to the segment level revenues and our food safety segment were 164 million in the quarter, an increase of 2% compared to the prior year, including core growth of 1%. The core growth was led by the bacterial and general sanitation product category, which benefited from the pathogen business wins John mentioned.
Dave Nymura: Moving to the segment level, revenues in our food safety segment were $164 million in the quarter, an increase of 2% compared to the prior year, including core growth of 1%. The core growth was led by the bacterial and general sanitation product category, which benefited from the pathogen business wins John mentioned, as well as increased distributor orders in Latin America.
As well as increased distributor orders in Latin America.
Dave Nymura: Within the indicator testing, culture media, and other category, solid growth in petrifilm and food quality and nutritional analysis sales was offset by a decline in culture media due mainly to a large one-time order in the prior year period.
Within the indicators testing culture media and other category solid growth in Petri film and food quality and nutritional analysis sales was offset by a decline in culture media due mainly to a large onetime order in the prior year period.
Dave Nymura: Natural toxins and allergens had a mid-single-digit core decline, with growth in allergen test kits offset by decline in natural toxin test kits due primarily to shipment delays.
Natural toxins and allergens had a mid single digit core decline with growth in allergen test kits offset by a decline in natural toxin test kits due primarily to shipment delays.
Quarterly revenues in the animal safety segment were $65 million, which includes a core revenue decline of 5% compared to the prior year quarter.
Dave Nymura: Quarterly revenues in the animal safety segment were $65 million, which includes a core revenue decline of 5% compared to the prior year quarter. The destocking trend abated somewhat, with non-genomic sales that go primarily through distribution down less than 3%, which was a notable improvement from the first quarter.
The destocking trend debated somewhat with non genomic sales that go primarily through distribution down less than 3%, which was a notable improvement from the first quarter.
Dave Nymura: Core growth in this segment was led by life sciences, a result of increased demand for substrates used by manufacturers of diagnostics tests and vet instruments and disposables, with higher sales of detectable needles and syringes.
Core growth in this segment was led by life Sciences, a result of increased demand for substrates used by manufacturers of diagnostics tests and debt.
<unk> and disposables with higher sales of detectable needles and syringes.
Dave Nymura: Growth in these product categories was offset by continued lower sales of certain animal supplements and wound care products in the animal care and other category due mainly to ongoing supply constraints.
Growth in these product categories was offset by continued lower sales of certain animal supplements and wound care products in the animal care and other category domain, mainly to ongoing supply constraints.
Dave Nymura: Our biosecurity products experienced a slight core revenue decline with higher volumes and rodent control products offset by decline in insect control products, largely the result of the phasing of certain distributor booking programs.
Our bio security products experienced a slight core revenue decline with higher volumes of rodent control products offset by a decline in insect control products largely the result of the phasing of certain distributor booking programs.
Dave Nymura: Worldwide genomics revenue was down mid-single digits on a core basis, which marked a deceleration from the first quarter. We continue to see decline related to small production animals, reflecting our strategic shift away from these offerings.
Worldwide genomics revenue was down mid single digits on a core basis, which marked a deceleration from the first quarter. We continued to see decline related to small production animals, reflecting our strategic shift away from these offerings.
Dave Nymura: The effects of this strategic shift in focus offset growth in international beef market.
The effects of this strategic shift in focus offset growth in international beef markets.
Dave Nymura: From a geographical perspective, core revenue growth was mixed. Growth was led by Latin America, which grew low double digits from strong petrochrome, pathogen, and hygiene monitoring sales.
From a geographical perspective core revenue growth was mixed growth was led by Latin America, which grew low double digits from strong Petri film pathogen and hygiene monitoring sales Asia Pacific grew modestly with solid growth in genomics in Australia, and China, mostly offset by a slight decline in food safety sales.
Dave Nymura: Asia-Pacific grew modestly, with solid growth in genomics in Australia and China, mostly offset by a slight decline in food safety sales. We saw a trajectory of recovery in Japan, while China, although a very small part of our total business, showed significant improvement from the first quarter.
We saw a trajectory of recovery in Japan, while China, although a very small part of our total business showed significant improvement from the first quarter.
Dave Nymura: In the U.S. and Canada, core revenue declined in the mid-single-digit range. Food safety sales were mostly flat, with solid growth in petrifilm and pap.
In the U S and Canada core revenue declined in the mid single digit range food safety sales were mostly flat with solid growth in Petri film and pathogens offset by the compare driven decline in culture media, while animal safety sales, which include genomics, we're down mid single digits.
Dave Nymura: offset by the compare-driven decline in culture media, while animal safety sales, which include genomics, were down mid-single digit.
Dave Nymura: The U.S. and Canada is the region most impacted by the build-in backlog that we saw during the quarter. Finally, sales in our EMEA region also declined in the mid-single-digit range as strong growth in pathogens was primarily offset by the aforementioned shipment delays and certain other food safety product categories.
U S and Canada as the region most impacted by the build in backlog that we saw during the quarter.
Finally sales in our EMEA region also declined in the mid single digit range as strong growth in pathogens was primarily offset by the aforementioned shipment delays at certain other food safety product categories.
Dave Nymura: Gross margin in the second quarter was 50.9%.
Gross margin in the second quarter was 59%.
Dave Nymura: representing an increase of 200 basis points from 48.9% in the same quarter a year ago, with the margin expansion driven primarily by benefits from favorable product mix.
Representing an increase of 200 basis points from 48, 9% in the same quarter a year ago with the margin expansion driven primarily by benefits from favorable product mix.
Adjusted EBITDA was $55 million in the second quarter with an adjusted EBITDA margin of 24%, representing a sequential improvement of 110 basis points from the first quarter.
Dave Nymura: Adjusted EBITDA was $55 million in the second quarter with an adjusted EBITDA margin of 24%, representing a sequential improvement of 110 basis points from the first quarter.
Dave Nymura: On a year-over-year basis, last year's second quarter followed the closing of the 3M food safety transaction, and adjusted EBITDA at that point did not include a full reflection of necessary expenses, which were only beginning to ramp up at that time to accommodate the increased size of the company and enable the exit of various transition arrangements.
On a year over year basis last year's second quarter, followed the closing of the three of them food safety transaction and adjusted EBITDA at that point did not include a full reflection of necessary expenses, which were only beginning to wrap up at that time to accommodate the increased size of the company and enable the exit of various.
Transition arrangements.
Adjusted net income was $25 million for the quarter with adjusted earnings per share of <unk> 11 cents compared to 31 million and 15 cents respectively. In the prior year period. The decline in adjusted net income was driven by lower adjusted EBITDA, which more than offset the reduced interest expense.
Dave Nymura: Adjusted net income was $25 million for the quarter with adjusted earnings per share of $0.11 compared to $31 million and $0.15, respectively, in the prior year period. The decline in adjusted net income was driven by lower adjusted EBITDA, which more than offset the reduced interest expense.
Dave Nymura: We ended the quarter with gross debt of $900 million, 67% of which remains at a fixed rate and a total cash position of $230 million.
We ended the quarter with gross debt of 900 million, 67% of which remains at a fixed rate and a total cash position of $230 million.
Dave Nymura: Relative to the first quarter, cash was impacted by an increase in working capital, primarily reflecting the purchase of finished goods inventory from 3M as we move the acquired products into our own distribution network as part of our transition agreement exit activity.
Relative to the first quarter cash was impacted by an increase in working capital primarily reflecting the purchase of finished goods inventory from three of them as we move the acquired products into our own distribution network as part of our transition agreement exit activities.
Dave Nymura: As John mentioned earlier, with the first half now behind us, we are in a better position to update our view of the fiscal year. While we believe things are beginning to stabilize in our end markets, we do not believe they are improving as steadily as contemplated in the original guidance we provided in July .
As John mentioned earlier with the first half now behind US where we are in a better position to update our view of the fiscal year. While we believe things are beginning to stabilize and our end markets. We do not believe they are improving steadily as contemplated in the original guidance we provided in July.
Dave Nymura: We are updating our guidance to reflect this slower pace of recovery, as well as incremental headwinds in our genomics business, and now expect full-year revenues to be between $935 and $955
We are updating our guidance to reflect the slower pace of recovery as well as incremental headwinds in our genomics business and now expect full year revenues to be between 935 and $955 million.
Dave Nymura: Taking into account the impact of the lower expected revenue, we now expect adjusted EBITDA will be in the range of $230 million to $240 million. We continue to expect capital expenditures to be approximately $130 million, including integration-related capital expenditures of approximately $100 million.
Taking into account the impact of the lower expected revenue. We now expect adjusted EBITDA will be in the range of $230 million to $240 million, we continue to expect capital expenditures to be.
Approximately $130 million, including integration related capital expenditures of approximately $100 million.
Dave Nymura: the majority of which we do not expect to repeat next fiscal year.
The majority of which we do not expect to repeat next fiscal year.
With respect to the third quarter, we expect a modest increase in revenue from the second quarter. Despite has historically been seasonally lower and some impact from our ongoing work with transition agreement exits and the elevated backlog.
Dave Nymura: With respect to the 3rd quarter, we expect a modest increase in revenue from the 2nd quarter, despite it historically being seasonally lower and some impact from our ongoing work with transition agreement exits and the elevated back.
Dave Nymura: We expect our adjusted EBITDA margin in the second half of the year to be higher than the first half. This would reflect sequential improvement in the third quarter and more substantially in the seasonally higher fourth quarter, driven by increased volumes and the exit of transition agreements. I'll now hand the call back to John .
We expect our adjusted EBITDA margin in the second half of the year to be higher than the first half. This would reflect sequential improvement in the third quarter and more substantially in the seasonally higher fourth quarter, driven by increased volumes and the exit of transition agreements I'll now hand, the call back to John for some closing thoughts.
John Aydins: Thanks, Dave. We took significant integration steps in the second quarter, launching our new ERP system and initiating the exit of our transition services agreements, which are important parts of the journey we're on to integrate the former 3M food safety business.
Thanks, Dave.
We took significant integration steps in the second quarter launching our new ERP system and initiating the exit of our transition services agreements, which are important parts of the journey. We're on to integrate the former three M food safety business.
John Aydins: While working on the integration, we've also been navigating end market weakness, which has unusually been happening simultaneously in both food and animal safety.
While working on the integration. We've also been navigating end market weakness, which is unusually been happening simultaneously in both food and animal safety primarily.
John Aydins: primarily driven by the post-COVID recovery in terms of inflation and right-sizing of output.
Driven by the post Covid recovery in terms of inflation and right sizing of output.
John Aydins: Encouragingly, the second quarter, we began to see signs that this end market weakness is abating.
Encouragingly the second quarter, we began to see signs that this end market weakness is abating.
John Aydins: particularly as it relates to food production volumes and distributor inventory levels.
Particularly as it relates to food production volumes and distributor inventory levels.
John Aydins: We believe our end markets are supported by secular tailwinds and the progress we've been making on the integration and prioritization of key growth initiatives only strengthens our position from which to capitalize as they improve.
We believe our end markets are supported by secular tailwind and the progress we've been making on the integration and prioritization of key growth initiatives, only strengthens our position from which to capitalize as they improve.
John Aydins: Moreover, as we continue to move forward through the integration, it puts us closer to what we believe is an even more attractive financial profile post-integration, particularly as capital spending settles in at normal levels.
Moreover, as we continue to move forward through the integration.
Puts us closer to what we believe is an even more attractive financial profile post integration, particularly as capital spending settles in at normal levels.
Our team members around the world their expend a tremendous effort and the integration of these high quality businesses and continue to do so ahead of our upcoming milestones and I want to wrap up here today by once again thanking them for their hard work and dedication.
John Aydins: Our team members around the world have expended tremendous effort on the integration of these high-quality businesses and continue to do so ahead of our upcoming milestones. And I want to wrap up here today by once again thanking them for their hard work and dedication. I'll now turn things over to the operator to begin the Q&A.
I'll turn things over to the operator to begin the Q&A.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
The first question on cobalt.
Speaker Change: The first question today comes from Brandon Vasquez with William Blair. Please go ahead.
Ben Brandon basketball with William Blair. Please go ahead.
Hey, good morning, everyone. Thanks for taking the questions Dave maybe I'll start with you maybe can you walk us through a little bit the updated guidance range, especially kind of like what's assumed at the high end of the range. What's assumed at the low end of the range. Given this is a little bit of a moving target at the moment given some of the macro backdrop, what gives you confidence in that and kind of the step.
Brandon Vasquez: Good morning, everyone. Thanks for taking the questions. Dave, maybe I'll start with you. Maybe can you walk us through a little bit the updated guidance range, especially kind of like what's assumed at the high end of the range, what's assumed at the low end of the range, given this is a little bit of a moving target at the moment, given some of the macro backdrop, what gives you confidence in that in kind of the step up in sales and profitability? And if possible, can you quantify any of the benefits that you might see on both of those ends coming in the back half of the year?
Up in sales and profitability and if possible can you quantify any of the benefits that you might see on both of those ends coming in the back half of the year.
Yes. Thanks for the question Brandon I think first of all the second half typically has a little seasonally better than the first half. So I think when we look at the second half we're counting on the impact of that seasonality the market not improving greatly again, we said we had anticipated market recovery in the year, we see that happening a little slower and pushing out but we.
Dave Nymura: Yeah, thanks for the question, Brandon. I think, first of all, the second half.
Dave Nymura: typically is a little seasonally better than the first half. So I think when we look at the second half, we're counting on the impact of that seasonality. The market not improving greatly. Again, we said we had anticipated market recovery in the year. We see that happening a little slower and pushing out, but we need to see some improvement in the end market. And I think those are the two bigger levers. And then, frankly, you know, we've talked about
We need to see some improvement.
In the end market and I think those are the two the two bigger levers and then frankly, you know we've talked about some challenges.
Dave Nymura: some challenges that we've had in the second quarter and getting some stuff out the door. We see that improving during the third and as the year goes on, so we need to see that improve as well. And I think, you know, particularly in the macro, it's been.
That we've had in the second quarter in getting some stuff out the door, we see that improving during the third and and as the year goes on so we need to see that improve as well and I think you know, particularly in the macro it's Ben.
Dave Nymura: It's been a little slower to develop, so the pace of recovery there will impact the range. We anticipate seeing some internal improvements and shipping in the third. You know, we're pretty happy with what we accomplished in the second, as John noted, but there was a lot going on. I think those are probably a couple of the bigger levers within the range.
It's been a little slower to develop so the pace of recovery there will impact the range.
We anticipate seeing some internal improvements in shipping in the third we're pretty happy with what we accomplished in the second as John noted there was a lot going on I think those are probably a couple of the bigger a bigger levers within the range.
Okay and maybe.
Speaker Change: John , for you, maybe a higher level picture, you know, we're a year past the deal now, a lot of great integration work has happened. I think
John for you, maybe a higher level picture.
We're past the deal now a lot of great integration work has happened I think one thing we haven't quite seen yet those are we used to talk about kind of a high single digits, plus maybe even some double digit growth periods as a combined entity. So I know, there's obviously a lot of other moving factors here, there's macro and there's some integration harder for us to know maybe the.
Speaker Change: One thing we haven't quite seen yet, though, is we used to talk about kind of a high single-digit plus, maybe even some double-digit growth periods as a combined entity. So, you know, I know there's obviously a lot of other moving factors here. There's macro and there's some integration. Harder for us to know maybe the specifics of all those details. So, from your end, has your conviction on what this combined entity can do changed at all now that we sit here a year later? And then the second part of that maybe is for David.
<unk> of all those details some from year end is your conviction on what this combined entity can do changed at all now that we sit here a year later and then the second part of that maybe is for Dave. Similarly, as we look at fiscal 'twenty, five and where we are with fiscal 'twenty. Four guidance are we kind of still on track for those fiscal 'twenty five.
Speaker Change: Similarly, as we look at fiscal 25 and where we are with fiscal 24 guidance, are we kind of still on track for those fiscal 25 proforma targets?
Pro forma targets.
Speaker Change: Yeah, thanks, Brian . Good to talk to you. Yeah, my convictions changed. It's gotten better.
Yeah, Thanks, Brian and good to talk to you Yeah. My conviction has changed its gotten better.
Speaker Change: I mean, I think the things that that I've seen during this first year and even the amount of things we accomplished in the second quarter really gets me excited about the future long term. And I think that's the.
I mean, I think the things that I've seen during this first year and even <unk>.
A lot of things we accomplished in the second quarter really gets me excited about the future long term and I think that's the.
That's the thing is that it's sometimes hard to look through all the noise of everything that's going on to look and see what this business is going to be when we're done but we have made so much progress do you think about the things we've done in the quarter with <unk>.
Speaker Change: That's the thing is that it's sometimes hard to look through all the noise of everything that's going on to to look and see what this business is going to be when we're done. But man, we have made so much progress.
Speaker Change: You think about the things we've done in the quarter with converting the SAP, you know.
Converting to S P.
Speaker Change: moving, predominantly moving off all of the distribution agreements and the tech service agreements. The only thing hanging out there then is Petri film, the plants.
Moving predominantly moving off all of our distribution agreements and the Tech service agreements. The only thing hanging out there that is feature from the plants.
Speaker Change: The building's up. It's enclosed. Equipment's going. I mean, we're making such great progress. And, you know, I was excited by a number of things that I saw. One is I think the market is firming up. As Dave said, it's not to where we thought it was, you know, when we were, you know, got out the crystal ball nine months ago.
The buildings up it's enclosed equipment go on I mean, we're making such great progress and you know I was excited.
By a number of things that I saw one is I think the market is firming up as James said, it's not to where we thought it was you know when we.
Got out the Crystal ball nine months ago.
Speaker Change: but we are seeing that the food safety market is firming up. The other thing we see is that the stocking is slowed down. The inventory levels are the same. They haven't gotten any lower. I think you're to an inflection point there. So I'm excited about the second half. You know, I'm excited around where the business is moving. And then the resiliency. Petri Film Business had a very strong quarter. Pathogen Business, the MDS, had a very strong quarter. And that worked right into what we had talked about with.
But we are seeing that the food safety market is firming up the other thing we see is that the destocking has slowed down the inventory levels are the same they havent gotten any lower.
You do have an inflection point there. So I'm excited about the second half you know I'm excited around where the business is moving and then the resiliency feature film business had a very strong quarter pathogen business to Mds at a very strong quarter and that that worked right into what we had talked about with cross.
Speaker Change: cross-selling, right? We're bringing that new pathogen business to existing Neogen customers and really are growing that franchise. So excited about that.
Selling right, we're bringing that new pathogen business to existing neogen customers and really are growing that franchise. So excited about that.
Speaker Change: and then the bounce back and APAC was really strong for the quarter, which I really like. So yeah, I'm excited about it. I'm excited to talk to people and let them know where we're going.
And then the bounce back in APAC was really strong for the quarter, which I really liked so yeah.
Yeah, I'm I'm excited about it I'm excited to talk to people and let them know what we're gone we've just.
You know, we've got a lot of things to do and we've done a ton we've got a lot more behind us than we do in front of us and that gets me really excited.
Speaker Change: You know, we've got a lot of things to do. We've done a ton. We've got a lot more behind us than we do in front of us. And that gets me really excited.
Brand and really quick to you too.
Speaker Change: Brandon, really quick to your point about 25, look, I mean, I
The point about twenty-five look I mean I.
Speaker Change: We originally came out with a view on 25 back in December of 21. And a lot transpired between the signing close of the acquisition. And then frankly, in the first, you know, 12 or 13 months of, I guess more now 15 months of ownership.
We originally came out with a view on 25 million back in December of 'twenty, one and a lot transpired between sign and close of the acquisition and then frankly in the first.
All over 13 months of a I guess more about 15 months of ownership.
Speaker Change: So although 25 will be dependent on where we see the market when we exit, I think what's the same is what we see in the long-range potential of the combined businesses, or as John notes, we're maybe even more bullish on that. So we think the thesis holds. It's just the timing of kind of the market puts and takes between now and then.
Although 25 will be dependent on where we see the market when we exit I think much the same.
What we see in the long range potential of the combined businesses or as John notes.
Even more bullish on that so we think the thesis holds its just the timing of kind of the market puts and takes between now and then.
Speaker Change: We want to get to next year, get to our guidance time, and we'll update people on 25 based on what we see as an exit rate coming out of the year and the outlook for next year. Important to note that, you know, we think the
We want to get too.
Next year get to our guidance time, and we'll update people on 25 based on what we see as an exit rate coming out of the year and the outlook for next year important to note that we think we think the.
Speaker Change: The thesis holds around our view of these combined businesses, it's the timing that's at play. It's difficult to call here while we're still working through 24, and we'll give an update when we give guidance for 25.
Pieces holds around our view of these combined businesses is the timing that's a play difficult to call here, while we're still working through 'twenty four and we'll give an update when we give guidance for 'twenty five.
Okay. Thanks, Dave and maybe one last follow up to that last comment you were making just to be clear you know we're talking a lot of a lot of moving pieces, but many of these seem like there'll be executed on in fiscal 'twenty. Four is the biggest maybe uncertainty in the bridge from today is the physical twenty-five macro or are there other factors there.
Speaker Change: Okay, thanks, David, maybe 1 last follow up to that that last comment you were making just to be clear, you know, we're talking a lot of a lot of moving pieces, but many of these seem like they'll be executed on and fiscal 24 is the biggest. Maybe uncertainty in the bridge from today to fiscal 25 macro, or are there other factors that we should be keeping an eye on?
We should be keeping an eye on.
David: I think macro is the biggest pace of recovery state of the macro economy. You know, we're going to work through the things that are within our control, but not everything is. So we'll snap the line on the environment as we exit the year.
Well I think I think macro is is the biggest base of recovery state of the macro economy, we're going to work through the things that are within our control, but not everything is so we will take it will snap the line on on on the environment as we exit the year.
Okay. Thanks, guys.
Thank you.
Speaker Change: The next question comes from David Westenberg with Piper Sandler. Please go ahead.
The next question comes from David Westenburg with Piper Sandler. Please go ahead.
Hi, This is John on for Dave. Thanks for taking the question can you walk us through what the genomics business performance would look like aside from the loss of the customer and how we should think about that going forward.
Speaker Change: Hi, this is John . I'm for Dave. Thanks for taking the question. Can you walk us through what the genomics business performance would look like aside from the loss of the customer and how we should think about that going forward?
So.
Speaker Change: When you think about the genomics business, what's really driving that is we made the decision that...
When you think about the genomics business, what what's really driving that is we made the decision that.
Speaker Change: When you use or when you service smaller animals like poultry that have a relatively low value, and those customers are under tremendous distress in their business, that the price pressure for those services got to a point where we decided, you know, that's not interesting to us. So we refocused the business to really move to the higher value, which is larger animals, cattle, dairy, and companion animal. And that's a big point.
When you use or when do you service smaller animals like poultry that have relatively low value and those customers are under tremendous stress on their business.
Price pressure for those services got to a point, where we just said that's not interesting to us. So we refocused the business too to really move to the higher value, which is larger animals cattle dairy and companion animal and that's a big point.
Yeah.
Speaker Change: quantifying what those customer losses were.
Quantifying what those customer losses were.
I mean, I think it's in the $3 million to $4 million range, but I don't really have that it's not a.
Speaker Change: in the $3 million to $4 million range, but I don't really have that. When you think about it from the total piece of the business, to me, it's not really material. It's really that macro environment of
When you think about it from the total.
Of the business, it's not a.
To me, it's not really material, it's really that macro environment of.
Those.
Poultry predominantly and some swine, but poultry predominantly or is really the challenge and and really finding ways that you know, it's just got to a price point that was unsustainable for us.
Speaker Change: Poultry predominantly and some swine, but poultry predominantly is really the challenge and really finding ways that, you know, it just got to a price point that was unsustainable for us.
Okay.
Speaker Change: Got it. Thank you. And can you remind us of any other second half comms we should be aware of for a month?
Got it. Thank you and can you remind us of any other second half comps, we should be aware of for our models.
Yes.
Speaker Change: I think they're calling me out in particular at this stage. I mean, I think the only thing, John , is, like we talked about with the macro environment, right, looking at, you know, the same thing we do. You know who our customer bases are, and looking at their commentary around the second half, where we're really aligned with them. And, you know, the things that I've seen from a number of them,
I think I would call anything out in particular at this stage.
The only thing John is like we talked about with the macro environment right looking at you know the.
Same thing, we do you know who our customer bases are and looking at their commentary around the second half, where we're really aligned with them and you know the things that I've seen from a number of them.
Speaker Change: They're pretty much saying the same story with the customers that they are value buying and that they are seeing.
They're.
Pretty much staying the same story with the customers that they are their value buying.
And that they're seeing.
The market improving.
Speaker Change: but they're still not growing. So sequentially they're getting better, but it's still not to a point where they have growth. And that's what we're seeing in the marketplace.
But they're still not growing so sequentially, they're getting better, but it's still not to a point, where they have growth and that's what we're seeing in the marketplace. So.
Speaker Change: I think that would be the thing that I would most watch is that macro environment.
I think that would be the thing that I would watch watches that macro environment.
Speaker Change: David, you got anything you want to add to that? I think that's right. Got it.
So have you got anything on antibiotics.
I think that's right.
Got it thank you.
Okay.
This concludes our question and answer session.
David Westenberg: I would like to turn the conference back over to John Aiden for any closing remarks.
I would like to turn the conference back over to John <unk> for any closing remarks.
John Aiden: Thank you, Betsy. I just want to thank everybody for joining us this morning. We're excited about the second half of the year. I want to wish all of you a fantastic 2024 and I look forward to talking to all of you again in April .
Thank you Betsy I just wanted to thank everybody for joining us. This morning, we're excited about the second half of the year I want to wish all of you a fantastic 2024, and I look forward to talking to all of you again in April.
Okay.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: ?
Okay.
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