Neogen(US:NEOG)2023-03-30 15:32Financial Data and Key Metrics Changes - The company reported revenues of $218 million for the third quarter, a 70% increase compared to the same quarter a year ago, with core growth of 4% [19] - Adjusted EBITDA was $51 million, representing a growth of 106% from the prior year quarter, with an adjusted EBITDA margin of 23.5%, an increase of 410 basis points year-over-year [30] - Gross margin increased to 49.5%, up 470 basis points from 44.8% in the same quarter last year, primarily due to the addition of higher margin business from the 3M Food Safety transaction [30][31] Business Line Data and Key Metrics Changes - Revenues in the Food Safety segment were $152 million, a 141% increase year-over-year, with core growth of 6% [20] - The Animal Safety segment reported revenues of $67 million, up 2% year-over-year on both a core and reported basis [21] - Core revenue in the Food Safety business acquired from 3M experienced a pro forma decline of 2% due to lower than expected production levels [25] Market Data and Key Metrics Changes - Worldwide genomics revenue increased by high single digits on a core basis, driven by growth in global beef markets, although there was weakness in China due to COVID-related lab closures [23] - The company noted macro-related softening in end markets, particularly affecting feed producers and the Animal Safety side of the business [5][6] Company Strategy and Development Direction - The company is focused on the ongoing integration of the Food Safety business acquired from 3M, with significant progress in commercial activities and infrastructure scaling [13][14] - A new distribution center in Mount Sterling, Kentucky, has been opened to enhance efficiency in serving customers [14] - The company is implementing a data strategy through Neogen Analytics, which aims to leverage structured data and analytics to improve food safety processes [37][38] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic headwinds affecting production and sales, particularly in the Food Safety segment, but expressed optimism about future improvements [5][34] - The company anticipates mid-single digit core growth for the second half of fiscal year 2023, although results may trend towards the lower end of that range due to production losses [33][34] - Management emphasized the importance of addressing backlog issues and ensuring continuity of supply to meet customer demand [26][34] Other Important Information - The company completed the acquisition of Corvium, a SaaS provider, to accelerate its organic data strategy [32] - The cash position at the end of the quarter was $183 million, impacted by integration CapEx and timing of interest payments [33] Q&A Session Summary Question: Can you quantify the backlog of Petrifilm sales in the quarter? - The backlog number was approximately $7 million, and while there has been some improvement, the company is still in an allocation situation [18] Question: What are the expectations for core growth in the 3M business? - The company does not anticipate significant improvement in the 3M business sequentially, expecting it to perform in the mid-single digit range [55] Question: How is the company managing debt and free cash flow? - The company noted elevated leverage due to integration CapEx and timing of interest payments, but remains focused on deleveraging [64][66] Question: What are the challenges with the Petrifilm manufacturing? - The primary issue is manufacturing capacity, not logistics or invoicing, and the company is working closely with customers to manage allocations [70][74] Question: Can you discuss integration and cost savings? - The company expects to gain efficiencies over time once transition service costs are reduced, but is not ready to quantify these savings yet [76]