Neogen (NEOG) Q4 Earnings call transcript Jul 30, 2024
AInvestTuesday, Jul 30, 2024 9:25 pm ET
2min read
NEOG --

Neogen Corporation recently held its fourth quarter earnings call for the 2024 fiscal year, providing insights into the company's financial performance and future outlook. In this article, we analyze the key themes, trends, and takeaways from the earnings call, offering investors and stakeholders a comprehensive understanding of Neogen's financial health and growth prospects.

Financial Performance

The call began with Bill Waelke, who outlined the financial results for the quarter, emphasizing the growth in total food safety core revenue, which increased in the mid-single-digit range. This growth was attributed to solid performance in the fourth quarter of fiscal 2023, with notable improvements in shipping performance and demand generation. The company also reported a core revenue decline of 3% in the Animal Safety segment, primarily due to the Genomics business in the U.S. and a flat market for companion animals. However, Neogen's Genomics business globally saw a decline on a year-over-year basis, with the company focusing on driving growth in the direct to producer beef and dairy business and managing through the mostly flat companion animal market by expanding its direct-to-consumer genetic testing offerings.

Product Developments and Market Trends

One of the most significant highlights from the call was the discussion on Neogen's product technology advancements, particularly in pathogen detection and Petrifilm. The USDA's Food Safety Inspection Service named Neogen's Molecular Detection System (MDS) as its primary screening method for Salmonella and Listeria in meat, eggs, and poultry, further validating the effectiveness and reliability of Neogen's MDS platform. This selection is expected to lead to growth opportunities in pathogen detection, a key area of investment for Neogen. Additionally, the launch of Neogen's Petrifilm automated reader, which automates the loading of Petrifilm plates, was highlighted as a strategic move to target high-volume testing environments. This automation is expected to allow users to automatically feed and enumerate up to 300 Petrifilm plates, reducing labor and increasing capacity for data analysis.

Future Outlook

Looking ahead, Neogen expects core revenue growth in the mid-single-digit range for the 2025 fiscal year, with a total revenue anticipated between $925 million and $955 million. The company plans to focus on winning back sales lost due to shipment constraints and is expecting improvements in the end market environment, particularly in food production volumes. Despite the challenges faced in the fourth quarter, Neogen remains committed to driving growth, particularly in regions where it is underrepresented, such as Asia, Europe, and Latin America. The company also highlighted its focus on innovation, particularly in its key technology platforms like MDS and Petrifilm, which are expected to drive growth and strengthen Neogen's leadership position in the industry.

Investor Questions and Analyst Insights

The call also featured a question-and-answer session with key shareholders and investors, providing valuable insights into their concerns and priorities. One analyst, David Westenberg, asked about the progress in winning back customers lost due to distribution inefficiencies and the potential for the new Petrifilm reader to drive business. John Adent, Neogen's CEO, provided details on the company's efforts to resolve distribution inefficiencies and its strategy to target high-volume food safety labs with the new reader. Another analyst, Brandon Vazquez, asked about opportunities and risks in the next 1 to 2 years from a commercial and P&L perspective. John and David Naemura, Neogen's CFO, discussed the company's focus on growth opportunities in underpenetrated markets and the challenges posed by bringing new Petrifilm manufacturing online. They also highlighted the importance of volume growth and operational improvements in driving P&L performance.

Conclusion

Overall, Neogen Corporation's fourth quarter earnings call provided a comprehensive overview of the company's financial performance, product developments, and future outlook. Despite the challenges faced in the fourth quarter, Neogen remains optimistic about its growth prospects, particularly in the areas of pathogen detection and Petrifilm automation. The company's focus on innovation, market penetration, and operational improvements is expected to drive growth in the coming years, positioning Neogen for long-term success in the food safety industry.

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