NEOG Neogen Corporation

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) January 9, 2024

 

NEOGEN CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Michigan	0-17988	38-2367843
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

 

620 Lesher Place Lansing, Michigan	48912
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 517-372-9200

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.16 par value per share	NEOG	NASDAQ Global Select Market

N/A

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition

On January 9, 2024, Neogen Corporation issued a press release announcing results of operations for its fiscal 2024 second quarter ended November 30, 2023. A copy of the press release is attached as Exhibit 99.1 to this report. This Form 8-K and the attached exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not incorporated by reference into any filing of the Registrant, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

Item 9.01 Financial Statements and Exhibits

99.1	Press Release dated January 9, 2024
104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

			NEOGEN CORPORATION
			(Registrant)
Date: January 9, 2024			/s/ David H. Naemura
			David H. Naemura
			Chief Financial Officer

 

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Exhibit 99.1

Neogen Announces Second-Quarter 2024 Results

 

LANSING, Mich., January 9, 2024 – Neogen Corporation (NASDAQ: NEOG) announced today the results of the second quarter ended November 30, 2023.

“This is an exciting time on the journey of integrating the former 3M Food Safety business, as we have made notable recent progress and are approaching several additional milestones,” said John Adent, Neogen’s President and Chief Executive Officer. “We initiated the exit of our transition services agreements, successfully completed the initial phases of the integration of two additional product lines and remain on track to exit all transition agreements outside of Petrifilm manufacturing, where supply has remained stable. Beyond the integration progress, our results for the quarter were in line with the expectations we communicated. In our Food Safety segment, order flows have remained stable, with underlying demand reflective of a core growth rate in the low to mid-single-digit range, absent the elevated backlog of open orders. Importantly, we saw solid core growth in Petrifilm, including an acceleration of growth in Asia from the first quarter. In our Animal Safety segment, destocking by distributors continued, but at a moderating rate compared to the first quarter."

Adent continued, “Despite the macro environment remaining challenging, we, encouragingly, are seeing our end markets beginning to show signs of improvement. In Food Safety, inflation appears to be easing and a continuation of this trend is generally expected to result in food production volumes inflecting. In Animal Safety, the destocking has begun to ease as distributor inventories are right-sized. With the greater visibility afforded to us by the first half of the year, however, we believe our end markets are improving at a pace slower than what was originally contemplated in our guidance and we are accordingly updating our outlook. With signs that the most significant external headwinds are stabilizing, we are focused on the value-creation opportunity we believe is ahead of us as we make continued progress on the integration and positioning the business for long-term growth.”

Financial and Business Highlights

Revenues for the second quarter were $229.6 million, a decrease of 0.2% compared to $230.0 million in the prior year. Core revenue, which excludes the impacts of foreign currency translation, as well as acquisitions completed and product lines discontinued in the last 12 months, declined 0.9%. Acquisitions and discontinued product lines contributed 0.2% to revenue growth, while foreign currency added 0.5%.

Net loss for the second quarter was $3.5 million, or $(0.02) per diluted share, compared to a net loss of $41.8 million, or ($0.19) per diluted share, in the prior-year period. The lower net loss was driven primarily by higher transaction fees and integration costs in the prior year, and benefits from product mix, with higher sales of higher margin products. Adjusted Net Income was $24.9 million, or $0.11 per diluted share, compared to $31.4 million, or $0.15 per diluted share, in the prior-year period. Lower Adjusted EBITDA drove the decrease in Adjusted Net Income. On a per-share basis, Adjusted Net Income was lower by $0.04 in the second quarter compared to the prior-year period.

Gross margin was 50.9% in the second quarter of fiscal 2024. This compares to a gross margin of 48.9% in the same quarter a year ago, with the increase primarily due to favorable impact from product mix.

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Second-quarter Adjusted EBITDA was $55.1 million, representing an Adjusted EBITDA Margin of 24.0%, compared to $64.1 million and a margin of 27.8% in the prior-year period, when operating expenses had not yet been fully added to accommodate the increased size of the Company following the completion of the 3M Food Safety merger.

Food Safety Segment

Revenues for the Food Safety segment were $164.4 million in the second quarter, an increase of 1.9% compared to $161.3 million in the prior year, consisting of 0.7% core growth, 0.3% from acquisitions and discontinued product lines and a foreign currency benefit of 0.9%. This core revenue growth was led by the Bacterial & General Sanitation product category, which benefited from new business wins in and increased distributor orders for the Company’s pathogen detection products. Within the Indicator Testing, Culture Media & Other product category, solid growth in Petrifilm and food quality and nutritional analysis sales was offset by a decline in culture media sales, due primarily to a large, one-time order in the prior-year period. In the Company’s Natural Toxins & Allergens product category, growth in allergen test kits was offset by a decline in natural toxin test kits, largely the result of shipment delays.

Animal Safety Segment

Revenues for the Animal Safety segment were $65.2 million in the second quarter, a decrease of 5.0% compared to $68.7 million in the prior year, consisting of a 4.7% core revenue decline, a 0.2% headwind from discontinued product lines and negative foreign currency impact of 0.1%. Within the segment, core growth was led by the Life Sciences product category, a result of increased demand for substrates, and the Veterinary Instruments & Disposables product category, driven by higher sales of detectable needles and syringes. This growth was offset by a decline in the domestic Genomics business, driven primarily by the attrition of a customer as the Company continues to shift its primary strategic focus towards genetic testing for larger production animals. The Animal Care & Other product category also experienced a core revenue decline due largely to lower sales of small-animal supplements and wound-care products.

On a global basis, the Company’s Genomics business experienced a core revenue decline in the mid-single-digit range, with increased sales in international beef markets offset by the customer attrition in the U.S., a result of the aforementioned strategic shift in focus.

Liquidity and Capital Resources

As of November 30, 2023, the Company had total cash and investments of $230.3 million and total outstanding non-current debt of $900.0 million, as well as committed borrowing headroom of $150.0 million.

Fiscal Year 2024 Outlook

Taking into account year-to-date results and increased visibility into the second half of the year, the Company believes improvements in its primary end markets are likely to happen at a slower pace than originally anticipated. As a result of this view, as well as incremental headwinds related to the strategic shift in focus of the Genomics business, the Company is updating its full-year outlook and now expects revenue to be in the range of $935 million to $955 million, with Adjusted EBITDA in the range of $230 million to $240 million. The Company continues to expect capital expenditures to be approximately $130 million, including approximately $100 million related specifically to the integration of the former 3M Food Safety Division.

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Conference Call and Webcast

Neogen Corporation will host a conference call today at 8:00 a.m. Eastern Time to discuss the Company’s financial results. The live webcast of the conference call and accompanying presentation materials can be accessed through Neogen’s website at neogen.com/investor-relations. For those unable to access the webcast, the conference call can be accessed by dialing (844) 757-5681 (U.S.) or +1 (412) 317-5297 (International) and requesting the Neogen Corporation Second Quarter FY24 Earnings Call (Conference ID: 10184962). A replay of the conference call and webcast will be available shortly following the conclusion of the call, and can be accessed domestically or internationally by dialing (877) 344-7529 or +1 (412) 317-0088, respectively, and providing the entry code 9249224, or through Neogen’s Investor Relations website at neogen.com/investor-relations.

About Neogen

Neogen is committed to fueling a brighter future for global food security through the advancement of human and animal well-being. Harnessing the power of science and technology, Neogen Corporation has developed comprehensive solutions spanning the Food Safety, Livestock and Pet Health & Wellness markets. A world leader in these fields, Neogen has a presence in over 140 countries with a dedicated network of scientists and technical experts focused on delivering optimized products and technology for its customers.

Certain portions of this news release that do not relate to historical financial information constitute forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties. Actual future results and trends may differ materially from historical results or those expected depending on a variety of factors listed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the company’s most recently filed Form 10-K.

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NEOGEN CORPORATION

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except for share and per share amounts)

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2023				2022				2023				2022
Revenue
Food Safety		$	164,403			$	161,343			$	330,681			$	225,986
Animal Safety			65,226				68,690				127,935				136,396
Total revenue			229,629				230,033				458,616				362,382
Cost of revenues			112,855				117,494				225,081				187,573
Gross profit			116,774				112,539				233,535				174,809
Operating expenses
Sales & marketing			44,832				36,348				90,615				59,731
Administrative			51,721				77,001				96,842				104,945
Research & development			5,756				6,846				12,478				11,727
Total operating expenses			102,309				120,195				199,935				176,403
Operating income (loss)			14,465				(7,656	)			33,600				(1,594	)
Other expense			(18,212	)			(26,435	)			(35,684	)			(25,838	)
Loss before tax			(3,747	)			(34,091	)			(2,084	)			(27,432	)
Income tax			(260	)			7,750				(100	)			9,200
Net loss		$	(3,487	)		$	(41,841	)		$	(1,984	)		$	(36,632	)
Net loss per diluted share		$	(0.02	)		$	(0.19	)		$	(0.01	)		$	(0.23	)
Shares to calculate per share amount			216,410,493				216,134,350				216,359,511				161,689,929

 

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NEOGEN CORPORATION

UNAUDITED CONSOLIDATED BALANCE SHEET

(In thousands, except share amounts)

		November 30, 2023				May 31, 2023
Assets
Current Assets
Cash and cash equivalents		$	205,765			$	163,240
Marketable securities			24,501				82,329
Accounts receivable, net of allowance of $3,403 and $2,827			150,498				153,253
Inventories, net			160,529				133,812
Prepaid expenses and other current assets			83,080				53,297
Total Current Assets			624,373				585,931
Net Property and Equipment			244,300				198,749
Other Assets
Right of use assets			15,015				11,933
Goodwill			2,137,983				2,137,496
Intangible assets, net			1,564,744				1,605,103
Other non-current assets			16,000				15,220
Total Assets		$	4,602,415			$	4,554,432
Liabilities and Stockholders’ Equity
Current Liabilities
Current portion of finance lease		$	2,569			$	-
Accounts payable			112,184				76,669
Accrued compensation			15,642				25,153
Income tax payable			10,217				6,951
Accrued interest			10,985				11,149
Deferred revenue			4,679				4,616
Other accruals			20,336				20,934
Total Current Liabilities			176,612				145,472
Deferred Income Tax Liability			355,005				353,427
Non-current debt			886,915				885,439
Other non-current liabilities			36,316				35,877
Total Liabilities			1,454,848				1,420,215
Commitments and Contingencies
Equity
Preferred stock, $1.00 par value, 100,000 shares authorized, none issued    and outstanding			—				—
Common stock, $0.16 par value, 315,000,000 shares authorized, 216,520,296 and 216,245,501 shares issued and outstanding at November 30, 2023, and May 31, 2023, respectively			34,644				34,599
Additional paid-in capital			2,574,994				2,567,828
Accumulated other comprehensive loss			(25,128	)			(33,251	)
Retained earnings			563,057				565,041
Total Stockholders’ Equity			3,147,567				3,134,217
Total Liabilities and Stockholders’ Equity		$	4,602,415			$	4,554,432

 

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NEOGEN CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

		Six Months Ended November 30,
		2023				2022
Cash Flows From (For) Operating Activities
Net loss		$	(1,984	)		$	(36,632	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization			58,203				32,467
Deferred income taxes			1,178				(1,983	)
Share-based compensation			6,150				4,499
Loss (gain) on disposal of property and equipment			754				(456	)
Amortization of debt issuance costs			1,720				999
Change in operating assets and liabilities, net of business acquisitions:
Accounts receivable, net			3,633				(44,452	)
Inventories, net			(25,929	)			6,478
Prepaid expenses and other current assets			(29,896	)			(37,833	)
Accounts payable and accrued liabilities			34,950				24,103
Interest expense accrual			(164	)			13,974
Change in other assets and liabilities			(9,892	)			5,967
Net Cash From (For) Operating Activities			38,723				(32,869	)
Cash Flows From Investing Activities
Purchases of property, equipment and other non-current intangible assets			(55,046	)			(25,102	)
Proceeds from the maturities of marketable securities			57,828				172,763
Purchases of marketable securities			—				(12,523	)
Business acquisitions, net of working capital adjustments and cash acquired			—				38,896
Proceeds from the sale of property and equipment and other			70				606
Net Cash From Investing Activities			2,852				174,640
Cash Flows From (For) Financing Activities
Exercise of stock options and issuance of employee stock purchase plan shares			1,141				920
Repayment of debt			—				(60,000	)
Debt issuance costs paid and other			(389	)			(19,276	)
Net Cash From (For) Financing Activities			752				(78,356	)
Effect of Foreign Exchange Rates on Cash			198				(7,888	)
Net Increase In Cash and Cash Equivalents			42,525				55,527
Cash and Cash Equivalents, Beginning of Period			163,240				44,473
Cash and Cash Equivalents, End of Period		$	205,765			$	100,000

 

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Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures, which management believes are useful to investors, securities analysts and other interested parties. Management uses Adjusted EBITDA as a key profitability measure. This is a non-GAAP measure that represents EBITDA before certain items that impact comparison of the performance of our business, either period-over-period or with other businesses. Adjusted EBITDA Margin is Adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.

Management uses Adjusted Net Income as an additional measure of profitability. Adjusted Net Income is a non-GAAP measure that represents net income before certain items that impact comparison of the performance of our business, either period-over-period or with other businesses.

Core revenue growth is a non-GAAP measure that represents net sales for the period excluding the effects of foreign currency translation rates and the first-year impacts of acquisitions and discontinued product lines, where applicable. Core revenue growth is presented to allow for a meaningful comparison of year-over-year performance without the volatility caused by foreign currency translation rates, or the incomparability that would be caused by the impact of an acquisition, disposal or product line discontinuation.

These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP. Please see below for a reconciliation of historical non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with GAAP.

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NEOGEN CORPORATION

RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

(In thousands, except for percentages)

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2023				2022				2023				2022
Net loss		$	(3,487	)		$	(41,841	)		$	(1,984	)		$	(36,632	)
Provision for income taxes			(260	)			7,750				(100	)			9,200
Depreciation and amortization			29,469				26,738				58,203				32,467
Interest expense, net			16,169				19,992				32,835				19,024
EBITDA		$	41,891			$	12,639			$	88,954			$	24,059
Share-based compensation			3,512				2,632				6,150				4,499
FX transaction loss on loan and other revaluation (1)			1,002				5,789				712				5,789
Certain transaction fees and integration costs			4,688				39,132				6,639				52,864
Restructuring (2)			1,856				—				2,415				—
Contingent consideration adjustments			150				—				450				—
ERP expense (3)			2,075				—				2,203				—
Discontinued product line expense			—				—				20				—
Recovery on sale of minority interest			(74	)			—				(74	)			—
Inventory step-up charge			—				3,859				—				3,859
Adjusted EBITDA		$	55,100			$	64,051			$	107,469			$	91,070
Adjusted EBITDA margin (% of sales)			24.0	%			27.8	%			23.4	%			25.1	%

 

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NEOGEN CORPORATION

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(In thousands, except for per share)

 

		Three Months Ended November 30,								Six Months Ended November 30,
		2023				2022				2023				2022
Net loss		$	(3,487	)		$	(41,841	)		$	(1,984	)		$	(36,632	)
Amort of acquisition-related intangibles			23,094				22,116				46,419				23,957
Share-based compensation			3,512				2,632				6,150				4,499
FX transaction loss on loan and other revaluation (1)			1,002				5,789				712				5,789
Certain transaction fees and integration costs			4,688				39,132				6,639				52,864
Restructuring (2)			1,856				—				2,415				—
Contingent consideration adjustments			150				—				450				—
ERP expense (3)			2,075				—				2,203				—
Discontinued product line expense			—				—				20				—
Recovery on sale of minority interest			(74	)			—				(74	)			—
Inventory step-up charge			—				3,859				—				3,859
Other adjustments (4)			—				4,350				—				4,350
Estimated tax effect of above adjustments (5)			(7,953	)			(4,676	)			(14,400	)			(9,769	)
Adjusted Net Income		$	24,863			$	31,361			$	48,550			$	48,917
Adjusted Earnings per Share		$	0.11			$	0.15			$	0.22			$	0.30

 

Source: Neogen Corporation

Contact

Bill Waelke

(517) 372-9200

ir@neogen.com

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v3.23.4

Document and Entity Information	Jan. 09, 2024
Cover [Abstract]
Entity Registrant Name	NEOGEN CORP
Amendment Flag	false
Entity Central Index Key	0000711377
Document Type	8-K
Document Period End Date	Jan. 09, 2024
Entity Incorporation State Country Code	MI
Entity File Number	0-17988
Entity Tax Identification Number	38-2367843
Entity Address, Address Line One	620 Lesher Place
Entity Address, City or Town	Lansing
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48912
City Area Code	517
Local Phone Number	372-9200
Security 12b Title	Common Stock, $0.16 par value per share
Trading Symbol	NEOG
Security Exchange Name	NASDAQ
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false

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