Q1 2020 Earnings Call
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Welcome to the new <unk> first quarter fiscal year 2020 conference call.
My name is Adrian and I'll be your operator for today's call.
At this time all participants are in a listen only mode.
Later, well conduct a question and answer session.
During the question and answer session.
If you have a question. Please press Star then one on your Touchtone phone. Please note. This conference is being recorded I'll now turn the call over John agent, John aided CEO you may begin.
Thank you Andrew.
Good morning, and welcome to our regular quarterly conference call for investors and analysts today, we'll be reporting on the first quarter over 2020 fiscal year, which ended August 31.
As usual some of the statements made here today could be termed as forward looking statements. These 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 in the company's Form 10-K as filed with the Securities and Exchange Commission.
In addition to those of you are joining US led by telephone conference I also welcome those of you joining us via the Internet.
Following our prepared comments. This morning, we'll entertain questions from participants who have joined this live conference.
I'm joined this morning by our Chief Financial Officer, Steve Quinlan, who will provide more detail on our results for the quarter.
Earlier today Neogen issued a press release announcing the results for our first quarter.
As stated in the release, our revenues were up 2% to approximately $101 million.
Our net income for the first quarter was $14.7 million or 28 cents per share compared to last year's quarterly net income of $15.2 million or 29 cents per share.
As a better perspective on our net income performance.
Those first quarter earnings last year represented a 28% increase over the prior year and that increase was primarily the result of higher deductions relating to employee stock option exercises.
Which contributed to an effective tax rate of 11% for the quarter.
In the quarter were once again challenged by currency headwinds.
In a neutral currency environment, our sales would have been 1.2 million higher this quarter.
As with other international organizations, we're committed to riding out the difficult international business climate that all us based companies now face.
While some of our businesses did well in the quarter. Our overall results did not meet the performance expectations that we have for ourselves.
Steve will detail some very strong performances that we had an individual market segments, including our genomics and natural toxin diagnostic tests goods is also going to address some of the areas, where we had weakness Steve.
Well, thanks, John and welcome to everyone listening this morning.
The Johns reported the overall sales and profit performance for the first quarter of our fiscal year and next few minutes I'll give you some color behind those results and we will start by discussing the performance of the food safety group.
We do continue to be impacted by fluctuations in currencies in the countries we operate in.
As John mentioned revenues would have been 1.2 million higher for the quarter and a neutral currency environment with the euro down 4% in the pound down 5% each largely the result of the Brexit uncertainty.
The Chinese RMB declined 4% due in part to the continuing.
Trade standoff with the us in the Aussie dollar declined 7% in the quarter.
And about $1 million of that shortfall is in the food safety segment as the majority of the international businesses reported through this segment.
Revenues overall for the food safety segment were $51 million in the first quarter of fiscal 2020, and that's a decrease of 2% compared to $52.2 million in last years first quarter.
The currency that the currency issues impacted the segment, but there were other issues within our international businesses, which also affected our results.
Our Brazilian operations had a 42% increase in sales of food safety diagnostic products led by continued market share gains in aflatoxin sales during the country's corn harvest and an 18% increase in dairy antibiotic test kit sales, but lost a large commercial lab customer testing testing for drugs.
In commercial drivers in Brazil.
As that customer change to a higher throughput method for testing.
And as we noted in last year's first quarter, we had a non recurring but a million dollar insecticide sale to a government agency in that quarter.
These two items offset the gains I discussed and the result was a decline in a 16% decline in sales in Brazil overall in the current quarter.
The loss forensic sales will impact the second and third quarters by approximately $800000 each quarter and a lesser amount in the fourth quarter.
Our European operations had sluggish results for the quarter with revenues up 1% in local currency, primarily on the strength of a 6% increase in our England based cleaning and disinfecting business.
Genomics revenues, which grew at a double digit pace throughout 2019, and 24% in last year's first quarter rose, 4% in the first quarter of this year.
These increases were partially offset by declines in culture media revenues lower sales of our products to detect spoilage organisms due to a large equipment sale in the first quarter of the prior year and relatively clean crops. After a mild go out deal win outbreak last year in France.
After converting to us dollars revenues for the European operations declined by 4% for the quarter.
Neogen Latino America, our business based in Mexico City had strong 36% growth in sales of our food safety products led by micro toxin kit sales due to an aflatoxin outbreak in corn in Mexico.
Sales rose broadly across all of the diagnostic product lines.
Sales of cleaners, disinfectants, and Rodenticides, however dropped 32% due in large part to lower demand and delayed orders from larger customers and distributors and this resulted in an overall increase in revenues of 5% for the quarter for this group.
Our operations in China were negatively impacted by the African swine fever outbreak in their country, which resulted in lower genomic testing for pork in the quarter and contributed to an 18% decline in revenue.
In China.
Our domestic food safety business only grew by 5% for the quarter, but there were some nice areas of growth within the business revenues for our industry, leading product line to detect inadvertent allergen contamination.
Which includes diagnostic test to determine the presence of milk peanuts and processed soy among others were up 11% domestically in the quarter tree nut and gliding test kit sales were particularly strong up 45% and 17% respectively for the period.
We've continued to strengthen our allergen test kit portfolio and recently added new test for contaminants such as coconut.
Our Accupoint line, which is used to detect general sanitation and cleanliness and food processing environments had a strong 12% increase in disposable sampler revenues during the quarter.
Our domestic natural toxin product lines product sales decreased 3% compared to last year's first quarter due in part to the late planting of corn and other grains. This spring caused by the severe weather, which has delayed the harvest of these crops.
We believe that as the crops mature, we will see an uptick in the sales in the second and third quarters.
Revenues for our test to detect the presence of antibiotics in milk declined by 8% in the quarter due primarily to lower demand from a large European distributor.
Our domestic culture media business declined 13% in the quarter.
A number of our larger customers, particularly those in animal vaccine production have pushed their orders for these products to the second quarter and second half of the year due to weakness in their markets.
Finally, we were unable to ship a number of readers for our product line to detect spoilage organisms, such as yeast and mold.
Due to back orders of a key part with one of our equipment suppliers and this resulted in approximately $400000 shortfall and reader sales for the quarters.
These readers are expected to ship in the second quarter.
The animal safety segment continues to be adversely impacted by the ongoing trade impasse between the us and China, which has disrupted our markets.
However, it recorded revenues of $50.4 million for the quarter up 6% over the 47.4 million achieved in last years first quarter.
This growth was driven by a 24% increase in service revenue at our domestic genomics testing and bio informatics business located in Lincoln, Nebraska.
With continued strength in the commercial beef and dairy cattle markets and market share gains in the companion animal parentage and wellness testing markets.
Worldwide genomics revenues rose, 17% with additional growth in Brazil, Australia, and Canada offset by lower sales in China.
Animal care products sold out of our Lexington, Kentucky based manufacturing and distribution center, such as small animal supplements wound care and antibiotics were up 10% and vet instruments, such as disposable syringes in marketing products rose, 9% for the quarter.
These gains were partially offset by lower sales of life science products. The result of lower forensic kits sales to commercial labs and higher promotional rebates.
Rodenticide sales declined 8% in the quarter due primarily to lower rodent pressure in certain areas of the country.
And domestic cleaner and disinfectant sales were essentially flat and insecticides rose 6% in the quarter.
Gross margins were 47.5% for the quarter compared to 46.9% in last years first quarter.
The improvement here is due to increased margins at our domestic genomics operations in the animal safety segment and a shift in product mix in the food safety segment toward products, which have higher gross margins and lower sales of lower margin products, such as culture media and bio security products.
Overall, our operating expenses rose, 6% in the quarter compared to last year's first quarter sales and marketing expenses increased 2% inline with revenue growth for the quarter.
General and administrative expenses rose, 5% for the quarter due primarily to higher depreciation expenses, resulting from our continuing investments in information technology infrastructure stock based compensation and increased legal fees.
Research and development expenses increased $869000 or 31% over the prior year as we continue development spending on a number of new products, which are scheduled to be launched in late fiscal 2020 in early fiscal 2021.
The $3.8 million. We spent this quarter is similar to the $3.6 million. We spent in the last quarter of 2019, we expect this run rate to continue throughout fiscal 2020.
Operating income for the first quarter was $16.3 million compared to 16.5 million in last year's first quarter expressed as a percent of revenues operating income was 16%.
Exactly compared to 16.5% last year with the decline the result of the higher R&D spending level.
We recorded 1.5 million in interest income for the quarter compared to 930000 last year and this reflects our higher cash and marketable securities balances and higher interest rates on those balances.
Foreign currency losses totaling 117000.
In the first quarter compares to 386000 in losses in the same period last year.
Our pre tax profit was $17.7 million compared to $17.1 million in last years first quarter.
And our effective tax rate for the first quarter was 17% compared to 11.1% in last years first quarter.
Last year's effective rate was unusually low due to $2.3 million in tax benefits recognized from the exercise of stock option. This year the comparable number was 769000.
As I've mentioned on previous calls the volume of option exercises can result in large fluctuations in the effective tax rate for the comparative periods.
On the balance sheet, our net receivables balance declined by 4% compared to year end and our collection period was 64 days for the first quarter.
Inventory increased by 1.7 million or 2%.
We're focusing significant effort this year on improving our inventory returns and have objectives and programs in place at each operation to make that happen.
We generated $23.7 million in cash from operations during the quarter invested $4 million of that in property plant and equipment and additional Mount additional amounts to license technology.
I'll stop here.
To say that we realized that we need to accelerate the organic growth performance of our business.
There were a number of areas in the business, which performed well in the quarter, which were obscured by onetime factors and other market noise.
We continue to be excited about the remainder of the year and appreciate your support and at this point I will turn it back to John for further comments.
Thanks, Steve.
Although we didn't reach all the financial goals, we set for sales in the quarter, we were able to solidify some partnerships that we believe will help drive our future performance.
Earlier this year after the Deputy Commissioner for Encana spoke about a new era of smarter food safety.
You said that this new era would be an enhancement to first month and focus on utilizing new and emerging technologies to make our food supply safer.
The blueprint for the newer narrow to drill several areas, including trace ability digital technologies and evolving food safety platforms I believe on this vision and the Neogen, we're leading the way in several areas.
First we signed a partnership of course from the leading producer of food safety and risk management software.
The success that Weve had developing and marketing food safety tests has led to an almost overwhelming amount of data that our customers from a store through to protect their customers and businesses.
This platform will help our food safety diagnostic customers aggregate analyze and act on that data.
The combination of World class testing products from a world class food safety and risk management system will allow our customers to reduce their food safety risk.
The new Neogen analytics platform will help our customers make quicker data driven decisions. For example, let's say a tester receives a positive result, using our listeria right now test what caused that result.
Was that a onetime event, the resulting from a transient problem that can be solved by single repeated sanitation effort.
Or is it a systemic problem with company must address through permit operational changes.
The software will help our customers determine the extent of the problem and provide a digital record for the remediation of mitigation efforts.
We continue to investigate new and novel block chain artificial intelligence and machine learning solutions to enhance our neogen analytics platform and help our customers identify and eliminate food safety issues.
We feel that providing products and services on an integrated and easy to use platform will continue to drive neogens market leading status.
Additionally, last week, we announced a collaboration with international genetic solutions to make our market, leading igenity beef profile even better.
Beef cattle producers use the product to select the best animals for the breeding programs that selection has now absolutely critical as replacement heifers represent an investment of about $2000 per head and the cost of development and the loss sale opportunity.
As part of this partnership Neogen will benefit from access to information that will improve the edge entity be profile and gas full endorsement for multi use of the product and important seal of approval from one of the largest genetic evaluation services in the world.
We believe that we've only just begun to realize the tremendous potential that our genomics technology can offer the livestock and companion animal industries as well as food processors.
We've continued our genomics laboratory expansions in China, Brazil, and Canada, and I've, just broken ground on an expansion at our flagship operation on Lincoln, Nebraska.
We're doing all we can to satisfy the accelerating demand for genomic services.
As Steve mentioned, while overall performance for the quarter did not meet our goals, we feel good about where we're going from here.
We continue to be well positioned in our growing markets with the right people and products and with the organizational strength to reach anywhere in the world where need exists.
We believe our continue worldwide dedication to food and animal safety will allow us to provide the results on our customers shareholders employees have come to rely upon.
Im excited about our future and look forward to stronger performances going forwards. Let me stop at this point entertain any questions from those of you have joined the call.
Thank you we will now begin the question and answer session.
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[laughter].
[laughter].
And our first question comes from Brian Weinstein from William Blair. Your line is open.
Hi, guys. Good morning. This is actually Andrew Brackman on for Brian or you can just limited Andrew good morning.
Maybe we can just first started off in the food safety side. It seems like there was several moving pieces there maybe.
No I appreciate the commentary on one of these some of these being sort of one offs, but what gives you the confidence that there's not really an underlying structural demand issue there.
Yeah, Andrew it's because we had we can quantify exactly what were those issues.
On a one off basis so we.
Yes, Steve talked about in Brazil.
It was a change of a customer amounting to a high throughput solution that we don't offer in that regard regarding a tender no government agency and a year ago, we talked about that I know Steve's got the details of exactly.
Well that walk up Loxa love him tell you a little bit Andrew how that walk up looks to get to a number where we feel it's.
More normalized.
Sure John So Andrew you know that road gamut tender was about a million dollars and if we just stay on the food safety side of the business that would have been about a 2%.
Improvement in results on that side, we talked about the currency being about a million dollars on that side, which again is about 2%.
That forensic business that the customer switched out.
Thats about 800000 dollar impact for the quarter by <unk> percent in half 1.6, and then we had.
What I would characterize as equipment and distributor.
Issues that we were about another million for that would have been another two and a half.
Percent so.
When you look at those.
That's about 8% differential.
From the food safety results that we reported.
And that that gets you to about 6% and then I would tell you that there were just other results that I would characterize as being somewhat sluggish this quarter, but not.
Steve, Yes, not sit systemic and didn't indicate a problem in the business. So.
Thats why I, you know I think John and I are both excited about the future of the business and that we aren't I mean disappointed in the quarter, yes, whatnot, but still excited about prospects going forward.
Okay. That's very helpful and I want to put words in your mouth and I know you guys don't guide on the segment level detail, but the expectation should be that as we move into the second quarter and sort of through the end of the year that growth rate on a on the organic and reported basis should should improve more to that mid to high single digit.
Yes, I mean, we like I said I'm looking forward to stronger quarters I want to get this one behind US we could go on.
Okay and then just last question for me.
I know we've talked in the past a little bit about the M&A strategy, but any update there on the pipeline or what just thinking about in terms of size of deal or timing. Thanks.
Size of deal we're looking at.
But one wide range.
From tuck ins to a bit more chunky, which were.
So we wanted to do.
From a timing standpoint.
Tuck ins I would have liked to have those done already this quarter, but it's hard to push some sellers. So those we know that those are in the queue and we're working actively on those.
And we continue to work the channel the pipeline looks good it's just getting some deals closed.
Okay. Thanks.
Standard.
Your next question comes compiled nitric Janney Your line is open.
Hi, John could you go over the genomics business a bit you had mentioned the various expansions if you could recap that and water customers buying I know you do a micro array based.
Testing, but or are you offering database us inquiries et cetera. So you could kind of go over the bricks and mortar and then secondly, you know well what the product offering encompasses today sure Paul.
So on a expansion standpoint, I mean, I think the biggest one is expanding our facility on Lincoln Nebraska.
We've run out a room, there and we've got a building next door that we're building out.
So we're going to increase capacity there are moving into a brand new facility.
In Canada that is already lab equipped so when we bought the Canadian business. We knew were going to have to expand that so we did that weve increased and Brazil. We've moved that facility for I think that was probably about two quarters ago, but really getting that up ramped enrolling on an increased in China.
So on a physical standpoint, we're really increasing the square footage and the amount of.
Yes, we can run and we need to because we've got to keep up with the demand from the customers.
On the product portfolio side, you know we continue to grow.
And our beef igenity profile product, which allow us commercial producers.
To choose the right animals for their system I think what's what's exciting about the announcement with AIG, yes.
That's that's a pretty progressive group, it's made up and 12 breed associations, they've got over 16 million animal records and they had about 400000, new animals annually. So think about using that data for us to improve the predictiveness and the effectiveness of our products were really excited to continue with that type of relations.
We're seeing growth and market share on the dairy side and picking the dairy heifers and then we've seen nice growth in companion, whether it's on both our wellness testing and our parentage testing so it's been.
It's been on really nice growth story, and it's continued to been a nice gross during this quarter was no exception to that.
And then lastly, John worked what would be your goal on an operating margin.
You want me to channel Jim Channel, Jim Paul for them I think.
Thanks, Jim listening unknowns Smile and right now I think you got to have a goal of 20 or more I mean, I think our business can do that.
It's something that we.
Continue to strive for but I think what we really want to focus on is continuing to incrementally expand operating margin and not so much say if I hit 20.
That's the goal because it's not the goal I think it's we want to continue to expand operating margins and doing away that balances our growth. So we don't stay for growth, we don't stifle innovation, but we continue to.
Improve their financial metric for our shareholders.
Okay.
Thank you.
Thank you.
Our next question comes from Jason Rodgers from Great Lakes review.
Yes, just wanted to follow up on the.
Lots of the Brazil lab customer.
If you could provide any more detail as far as why they change solutions and is there any other lab customers you have in Brazil at risk there.
So.
You don't want to business started that was really.
Grades opportunistic solution that our team provide into a marketplace. We added we had a test that.
Really can meet the needs there, but it really wasn't our business within those customers very well.
And what have always that Brazilian hair market grew so quickly.
But the customer need and it was the largest in that market need at a higher throughput solution and we just didn't offer it. So we continue to sell.
Our test kits to other.
Labs within that market. They just don't have that same level of throughput and im not as concerned because that that equipment is extremely costly from a capital lay out from a capital standpoint, and only the largest can really afford to do that type of.
Solution, so I'm not as concern I think what.
The the risk there going forward is if the new president of decides to eliminate the regulation.
And he ran on that from a campaign promise now he hasn't changed anything yet, but that that could be something looking forward that if he stops requiring the test.
Then high throughput ours doesn't matter, they're just not going to test for it.
All right and then looking at the genomics market you talked about some good growth in that whole companion animal business.
How large is that now as a percent of your total genomics business and how fast do you expect that to grow and how large the market how large of a market could that be.
I don't know if we've ever season at the long I don't know remembering split that out.
Let me talk Jason little bit about how big it could be I mean.
Think about.
Kind of the tremendous growth that on the human side, you had on ancestry dot com or some of those other parentage types I mean.
The growth has been just phenomenon I think.
That always those type of trends always seem to trickle down to.
The companion segment as pets are part of the family and people want to know.
The history of where my at warm I, Don came from and what it's traits are and didn't have a champion and its pedigree in the background. So I think those things are very important than and it's going to continue to grow.
The other piece, we're really excited about as the wellness piece.
And.
We know that we're just getting started with and working on is looking at.
Can we help pet owners and veterinarians make.
Better decisions around treatments, if we could predict that you know this youre puppy.
Perhaps as tendency for hip dysplasia or for some other disease that we can find a marker for that would then help you.
Customize and do a diet or training program or an exercise program, that's going to help mitigate that to give that to give your pet a much better quality of life. So I think those are big markets and we're just scratching the surface item.
Okay. Thanks for the detail there and just one final one.
Given all the increases that you're going underway in genomics I wondered if you. If you have updated capex estimate for fiscal 20.
The biggest Paul.
Item for Capex in the genomics business is going to be the expansion of the Lincoln All facility that John mentioned, that's probably going to ultimately be about a two and a half million dollar.
You know renovation or build out.
And then there'll be some equipment that will follow behind it.
It may may move into fiscal 2021, but it will be about two and half million of spending in this year.
So or would that put capex overall and companywide for fiscal Tony.
Capex, it's going to be I'd put it somewhere in the 15 to 18 million dollar range, depending on timing of spend somewhere in that.
Okay. Thank you.
Welcome Thanks, Jason.
And your next question comes from Kevin knowledge from Craig Hallum. Your line is open.
Hi, Good morning, guys. Thanks for taking the questions I guess, what's fair enough with the African swine fever.
You guys did call out the 18% declining revenue in China.
Just wondering what the outlook is now and do you expect this pressure to continue and I guess for how long.
Yeah, that's a good question Kevin.
I think the pressure will continue on the genomic side, a little longer because they're just.
Our unclear how they're going to go forward and.
And the nice thing about the diversity of our businesses the puts and takes because while we had that decline. There I mean, we had increased sales of cleaners and disinfectants in China for the exact same reason.
Right so.
It's a it's a negative on one side of the business as an opportunity on the other.
And.
I, just don't know whether China has got a good handle.
On how they're going to manage this disease.
And not just try and I'm going to everybody else to be quite honest.
Great and have you seen.
The impact of Atkins planting responding to some of the having markets that you're in John .
Yes, I mean you saw.
South Korea, just announced last week that they have confirmed cases.
That came from North Korea, who has an announced but you know not a shock that north Korea's announced anything.
I think now it's in 13 countries and it's it's going to end. The challenge now is I think I can't help philippians was the other one Kevin and that one was a little concerned and because now it's not just land based so you can see I would go from China through the command Korean Peninsula through land, but now this thing.
When you got to the Philippines and gone about are applying so.
That's going to be a little interesting.
Well hopefully that'll be good for your cleaners, and disinfectants does that's exactly right right right. So ill ask for the.
Interesting on the companion animal genetic testing drilling appreciate those comments.
I see that have your own tasks are you doing any private label work I mean, clearly there's a lot of genetic test brands out there now like with some panel embark are you doing any private label or have you thought about doing any of that we do when we do help out and do the one of the back office or some of the some of them all.
The ones in industry.
Okay.
And when I was thinking.
And then lastly, you talked about accelerating organic growth and quickly I appreciate the comments on the food safety side, but what other things are you putting in place to drive organic growth and I guess over what timeframe do you think it'll take before we see that benefit.
Well, we've got we've got new products and technology come on in the second half of the year that we're pretty excited about that.
I was going to help us long term.
With that in the back half of the year I can't say that I'm counting on it to be a big driver for this fiscal year.
We're adding salespeople, we continue to add sales teams and all right markets to continue to try to grow and and find that find the marketplace.
We're constantly evaluating our distributors.
You know I think.
What was interesting was we had some programs are pretty successful and animal safety side and got distributors interested in the U.S., which help that growth I don't think the market getting any better but I think some of the things that we offer it had a positive influence on those distributors, but as Steve mentioned I, you know I got a distributor in Europe that.
We've been working with for a while than we've had declining sales for two to three years and we got to address things like that.
And so those are some of the things that we've got to do to continue to drive organic growth is.
To continue to put more people in the field to help drive our direct sales.
Work with our distributor partners to help them reached the end customer and influence and customer pull products through their warehouses. So we can drive sales I also.
Got it makes sense, thanks to all the health Thanks, John Thanks, Kevin Kevin.
And as a reminder to ask a question. Please press Star then one on your touched on sound and your next question comes from Kevin alerts from.
Hi, Carolyn.
I would just that Kevin.
Actually cute backed up a little if any enough and then John but Oh go ahead, Kevin you back on all right. So.
Nice to hear from you Kevin [laughter]. Thank you.
You talked a little bit about the.
The wet summer that we've had in the Midwest and I think you said you expect sales to.
You know improve here in the.
The next couple of quarters with the corn crop coming in just wondering how much that affected.
Growth this quarter.
For if it had any impact.
I mean, there was probably a little bit of timing, Kevin, but it really I can't say that much I mean, I know the harvest is delayed.
Because there's such a wet spring and everything's delayed.
But.
Maybe some early crop corn last year would have been and the first quarter and now it's in second but I don't think it's that big of a.
Big have an impact most that corn harvest is always in the second quarter anyway.
Got it.
Excellent. Thank you.
And our next question comes and David West can vary from Guggenheim. Your line is open.
Hey, Thank you for taking the questions. So.
You talked about your long term growth rate around high single digits, 8% ash weight with animal safety means 6% to 8% and food safety being 8% to 10% and so just wondering do you still see that is as long term growth rates of the of the business and how confident are you that.
That you can grow back to that rate and do you think there might be any market share dynamics over the last few quarters that might have been affecting those growth rates.
So David I think yes, I think theres been some market dynamics, especially in animal safety side, and we'd beat that a pretty good I mean, that's that's a cyclical market and we're kind of the trough with that one and that's just that's a tougher wanda squeeze out those type of rates.
Food safety I feel very confident I mean, there was just a there was a report that came out the other day from I think it was the Swiss federal that's due to technology and it was interesting about that they've talked about the meat consumption has risen by more than half in Africa and up by two thirds in Asia and Latin America, So our long term prospects.
Whether it's on the farm side, helping those producers produce clean healthy animals or even on the food safety side is going to continue to grow.
So I think I think we've got really good opportunities and then when we started getting some acquisitions and layered on top then im really excited.
All right now thank you and then on the acquisition front. So how would you categorize out a private equity right now do you still feel like the devaluation do seem a little bit higher than they are historically and DC any pickup in terms of of competition for for acquisitions.
It depends David how far are your history goes back and looks.
I mean, if you want to if you go back this has been a pretty.
There's been a lot of money in the market for last couple of years and yeah. The if you go back to say Youre look over 10 years the than yes, the rates or.
Probably higher than the 10 year average, but over the last couple of years Theres still a lot of money on the sidelines trying to get put to use.
And so.
You know, maybe maybe we've done to going to story to tell them how greater market. This is because not everybody wants to come in it but [laughter] weighing all come on and I'm ready to go I mean long about led by everyday right. So we really believe in the team we believe in our products.
We believe in the people we haven't been we're ready to compete.
Got it all right now and just one last question I know you already kind of got into it with Kevin's question, but just want to get further kind of conceptualize what what the long term opportunity around asaph. So can you maybe give maybe some some feedback from customers in Asia or some way for us to think about.
All the opportunities because I I mean, obviously, I mean cleaners and disinfectants business picked up but.
Could this be some sort a 10 year drive a multi products I mean I just this really would help us.
What about the upside of what that could be yeah. I mean, if you think conceptually right and.
You could you would say with this type of issue.
A strong efficacious products encompassed with a biosecurity program.
I would be a benefit to neogen and the long term with us but.
You can't have one without the other you have to have a program in which.
Youre doing things properly to stop the spread of the disease. So I think long term CMB absolutely I also think if you think longer term on the genomic side when they have to re populate all those animals.
It's going to be in their best interest to try to pick the best breeding stock to re populate all those animals, whether it's in China, Romania.
South career Philippines.
And we work with all those.
Companies today, so I think we have opportunities here.
But it's a put and take I mean, you're going to have some.
Some negatives because if they're just deep populating 30, 40%, you're not going to process those animals, if you're not going to process. The animals, you may not use our pathogen testing.
So.
There are upsides for this and there are a downside, but either way neogen can help customers find the right solutions.
Thank you very much.
Thanks, David.
And this concludes the question answer session I will turn call back over to John agent for final remarks.
Great. Thank you.
Thanks, Oliver you for joining the call today and if you haven't already please be sure to return your proxy votes via the mail and whether you have over your mail or not you're all welcome to attend our annual meeting October Threerd and Lansing and if you have any questions about that please contact rod Poland.
So thanks, everybody we appreciate it.
Thank you ladies and gentlemen. This concludes today's conference. Thank you participating and you may now disconnect.
Yeah.
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