Neogen(US:NEOG)2019-09-24 19:18Financial Data and Key Metrics Changes - Revenues increased by 2% to approximately $101 million compared to the previous year [6] - Net income for the quarter was $14.7 million or $0.28 per share, down from $15.2 million or $0.29 per share in the prior year [6] - Gross margins improved to 47.5% from 46.9% in the previous year [23] - Operating income was $16.3 million, slightly down from $16.5 million in the prior year [25] Business Line Data and Key Metrics Changes - Food safety segment revenues decreased by 2% to $51 million, impacted by currency fluctuations and other issues [12] - Animal safety segment revenues increased by 6% to $50.4 million, driven by a 24% increase in service revenue from domestic genomics testing [21] - Genomics revenues rose 17% globally, with growth in Brazil, Australia, and Canada, but lower sales in China [22] Market Data and Key Metrics Changes - Brazilian operations saw a 42% increase in food safety diagnostic product sales, but overall sales in Brazil declined by 16% due to the loss of a large commercial lab customer [13] - European operations had a 1% revenue increase in local currency, but a 4% decline when converted to U.S. dollars [14] - Domestic food safety business grew by 5%, with significant growth in allergen test kit sales [17] Company Strategy and Development Direction - The company is focusing on partnerships and technology to enhance food safety, including a collaboration with Corvium for data management [31] - Continued investment in genomics laboratory expansions in multiple countries to meet growing demand [35] - The company aims to accelerate organic growth through new product launches and increased sales personnel [73] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in meeting performance expectations but expressed optimism about future growth opportunities [8][28] - The ongoing trade impasse with China is affecting the animal safety segment, but there are positive prospects in food safety due to rising meat consumption in emerging markets [85] - Management is confident in the long-term growth rates of 6%-10% for animal and food safety segments, respectively [84] Other Important Information - The effective tax rate for the quarter was 17%, up from 11.1% in the previous year due to lower tax benefits from stock option exercises [26] - The company generated $23.7 million in cash from operations during the quarter [27] Q&A Session Summary Question: Concerns about underlying demand issues in food safety - Management clarified that specific one-off issues impacted results, and they remain confident in future performance [41][42] Question: Update on M&A strategy - Management is exploring a range of deal sizes and is actively working on potential acquisitions [44][45] Question: Details on genomics business expansion - Management discussed ongoing expansions in Lincoln, Canada, Brazil, and China to meet customer demand [49][50] Question: Impact of African swine fever on revenue - Management indicated that pressure on genomic testing in China will continue, but there are opportunities in other product lines [67][68] Question: Long-term growth rates and market share dynamics - Management reaffirmed confidence in long-term growth rates and identified market dynamics affecting performance [84][85]