Neogen Corporation’s quarterly report for the three months ended August 31, 2024, shows a net loss of $1.4 million, compared to a net income of $2.1 million in the same period last year. Revenue decreased by 10% to $134.1 million, primarily due to lower sales in the company’s livestock and poultry diagnostic segment. Gross profit margin decreased to 44.1% from 46.3% in the same period last year, mainly due to higher costs and lower sales. The company’s cash and cash equivalents decreased by $14.1 million to $143.1 million, and its debt increased by $10.1 million to $143.1 million. The company’s management attributes the decline in revenue and profitability to various factors, including the ongoing COVID-19 pandemic, increased competition, and supply chain disruptions.
Summary and Analysis of Key Points
Overview of Financial Performance
Neogen’s financial performance for the three months ended August 31, 2024 showed a decline compared to the same period in the previous year. Total revenues decreased by $12.0 million, or 5%, driven by a $9.0 million unfavorable foreign exchange rate impact and a $3.0 million decline in the business. The decline in the business was due to lower genomics volume, lower sales of insect control and cleaners/disinfectants, and lower sales of sample collection products, partially offset by strength in indicator sales and rodent control products.
Service revenue, which consists primarily of genomics services, was relatively flat at $24.4 million compared to $24.6 million in the prior year period. International sales also declined by $5.3 million, or 4.5%, due to the $9.0 million currency headwind, partially offset by strength in Petrifilm indicator sales.
Gross margin decreased from 51.0% to 48.4%, primarily due to lower volume and higher distribution costs, as well as $4.2 million in transaction and integration costs compared to $1.2 million in the prior year period.
Revenue and Profit Trends
Revenues declined across both the Food Safety and Animal Safety segments. Food Safety revenue decreased by $6.9 million, or 4%, due to the $9.0 million currency headwind, partially offset by $1.8 million of business growth. Animal Safety revenue decreased by $5.1 million, or 8%, driven by lower sales in the biosecurity, animal care, and genomics product categories.
Operating income declined significantly, from $19.1 million to $2.3 million, a decrease of 88%. This was due to the lower gross profit and an increase in operating expenses, particularly in the Corporate segment related to higher compensation, shipping, and IT costs associated with the new enterprise resource planning system.
Strengths, Weaknesses, and Outlook
Key strengths include Neogen’s diverse product portfolio, strong brand recognition, and global reach. Weaknesses include exposure to foreign exchange fluctuations, supply chain challenges, and inflationary pressures impacting costs and margins.
The outlook for Neogen remains uncertain, with continued economic headwinds expected throughout fiscal year 2025. These include softening consumer demand, higher interest rates, and ongoing geopolitical tensions. The company is also working to resolve shipment delays and order fulfillment issues related to the implementation of its new enterprise resource planning system.
Neogen’s management remains optimistic about the company’s long-term prospects, but historical financial information may not be indicative of future results. The company continues to evaluate the impact of these issues on its business and is taking actions to mitigate the challenges.