Neogen(US:NEOG)2019-03-26 21:45Financial Data and Key Metrics Changes - Revenues for Q3 2019 increased by 3% to approximately $98 million, while year-to-date revenues rose by 5% to about $304 million [7] - Net income for the current quarter was just over $13 million, or $0.25 per share, compared to $16.6 million, or $0.32 per share in the same quarter last year [8] - Year-to-date net income was $44.4 million, or $0.85 per share, compared to $45.6 million, or $0.88 per share last year [8] - Gross margins were 45.7% for the quarter, down from 47% in the previous year [48] - Operating income was 15% of sales for the quarter, compared to 16.8% in the same quarter last year [53] Business Line Data and Key Metrics Changes - The animal safety segment faced challenges, particularly in rodenticides and insecticides, which saw a decrease in sales [16] - The genomics business grew significantly, with sales of detectable needles increasing by 17%, cleaners and disinfectants by 18%, and vaccines by 13% [16] - The food safety segment performed strongly, with global sales of tests for natural toxins increasing by 17% and a 35% increase in sales of DON test kits [17][18] - Sales of test kits for foodborne pathogens increased by 16%, with Listeria Right Now test system sales almost five times higher than the previous year [20] Market Data and Key Metrics Changes - International revenues were up about 9% for the quarter and 12% year-to-date, with significant growth in Brazil and Mexico [32] - Neogen's operations in Brazil saw revenues increase by almost 40% compared to the prior year [40] - Revenues from Neogen China operations were up about 9% for the quarter, while revenues in India doubled from a small base [41] Company Strategy and Development Direction - The company is focused on addressing short-term challenges in the animal protein market while leveraging growth opportunities in food safety and genomics [60] - New product launches, such as the coconut allergen test and the portable Raptor test system, are expected to drive future growth [61] - The company is actively pursuing acquisitions to enhance its capabilities and market presence, particularly in international markets [45][90] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the cyclical downturn in the animal protein market but expressed optimism about long-term growth potential [14][64] - The effective tax rate increased to about 21% this year from 4% last year, impacting net income comparisons [12][55] - Management remains positive about future growth, citing strong performance in food safety and genomics despite current market challenges [57][64] Other Important Information - The company faced currency headwinds that negatively impacted revenues, with a neutral currency environment potentially adding $2.5 million to reported revenues [12][47] - Operating expenses increased by 5% for both the quarter and year-to-date, with R&D expenses rising by 15% in the quarter [51][52] Q&A Session Summary Question: Can you provide insight into the performance of the animal safety segment? - Management noted a general softness in the U.S. animal safety business, with challenges across the board, particularly in rodenticides [68][69] Question: What are the expectations for growth in the animal protein markets? - Management indicated uncertainty in predicting the timing of recovery in animal protein markets but expressed confidence that they will eventually improve [70][74] Question: What actions are being taken to accelerate growth? - The company is working with distributor partners to drive end-user sales and is focused on launching new products to capture market share [75][76] Question: Can you elaborate on the acquisition pipeline? - Management confirmed that there are four acquisition candidates in the pipeline, all international and strategic in nature [88][90] Question: What is the expected tax rate for the upcoming quarters? - The effective tax rate is expected to remain around 21% for the fourth quarter and into fiscal 2020 [119]