Neogen reports fiscal 2019 results

July 23, 2019

Press Release
CONTACT: Steve Quinlan, Vice President & CFO, 517.372.9200

LANSING, Mich., July 23, 2019 — Neogen Corporation (NASDAQ: NEOG) announced today that revenues for the fourth quarter of its 2019 fiscal year, which ended May 31, were $109,762,000, compared to $108,120,000 the prior year quarter. Revenues for the company for the full fiscal year were $414,186,000, compared to the prior year’s $397,930,000.

Fourth quarter net income was $15,815,000, or $0.30 per share, compared to the prior year’s $17,545,000, or $0.33 per share. Net income for the full 2019 fiscal year was $60,176,000, or $1.15 per share, compared to the prior year’s $63,145,000, or $1.21 per share.

“During the year, we made a number of changes that position us well for the future, and we had strong performances in certain areas of the business. Our core domestic food safety diagnostic business had a solid year, increasing revenues 12% compared to the prior year, as we seized existing opportunities by increasing market share and responding to regional outbreaks, and created new opportunities by developing innovative products for the marketplace,” said John Adent, Neogen’s president and chief executive officer. “Of special note in our 2019 fiscal year was an 11% increase in international sales, despite currency issues, with widespread gains in most geographies. Although it was a difficult year for our Animal Safety segment due to ongoing challenges in the animal protein markets we serve, we produced significant new sales within our veterinary needle and syringe business, and of products for the companion animal market. Our overall genomics business also continued its steady growth, with revenues up 12%, with strong performances throughout our global operations.”

The fourth quarter was the 109th of the past 114 quarters that Neogen reported revenue increases as compared to the same period in the previous year — a record spanning over 28 years.

Gross margins for the company were 46.3% in fiscal 2019, compared to 46.8% in fiscal 2018. The change in margin percentage was the result of product mix shifts within each segment towards products which have lower margins. Operating income was $68.1 million, or 16.4% of sales, in the current fiscal year, compared to $70.2 million, or 17.6%, in the company’s 2018 fiscal year. The decline in operating income was due to the lower gross margin percentage and increased operating expenses, with significant spending on new product development.

“If currency rates had been the same as the prior year, revenues for the fourth quarter would have been $2.3 million higher, and revenues for the full year would have been $8.0 million higher. In a neutral currency environment, earnings per share would have been approximately 1.5 cents higher in the fourth quarter, and approximately 5.5 cents higher for the entire year,” said Steve Quinlan, Neogen’s chief financial officer. “Despite this, fiscal 2019 was another solid year of cash generation; our balance sheet remains strong, and we are well-positioned to pursue our various growth strategies.”

Revenues for the company’s Food Safety segment increased 10% during the 2019 fiscal year compared to the prior year. The segment’s current year results included a 15% increase in sales of test kits to detect natural toxins in grains, including significant increases in sales to detect aflatoxin in corn in Brazil, and deoxynivalenol (DON) in Canada and France. The sales increase in the mycotoxin product line was also aided by the introduction of Neogen’s new Raptor® testing platform, which can be used to simplify and quicken the natural toxin testing and results process.

Compared to the prior year, global sales of Neogen’s foodborne pathogen detection tests increased 24% — including a 45% increase in sales of tests to detect Listeria. This growth was largely the result of a nearly five-fold increase in sales of the company’s innovative Listeria Right Now™ test system, which detects Listeria in environmental samples in under 60 minutes — without the need to enrich samples. Sales of the company’s general sanitation products, including its AccuPoint® Advanced ATP test system, increased 11% in the 2019 fiscal year, and sales of Neogen’s rapid diagnostic test kits to detect food allergens, including gluten, milk, soy and peanuts, rose 7% in the current year.

Revenues from international sources increased to 40.1% of total revenues in the current year, compared to 37.6% last year. After adjusting for adverse currency translations, revenues from outside of the United States increased 11% for fiscal 2019. Revenues for our combined European operations increased 8% in U.S. dollars (12% in pounds), Mexico-based Neogen Latinoamerica’s sales increased 13% (17% in pesos), and our Brazilian revenues increased 16% (36% in reals) for the year. Neogen’s sales performance in Brazil in fiscal 2019 was led by significant increases in forensic kits to test commercial drivers, sales of test kits to detect aflatoxin in corn, and sales of genomic testing services specifically for cattle breeds popular in Brazil (e.g., Nellore). For the current year, Neogen China increased 13% (17% in yuan) and Neogen India increased 71% (86% in rupees) compared to the prior year, albeit from a small base. Revenues from our Australian operation, acquired in September 2017, outperformed expectations in its first full fiscal year.

Neogen’s Animal Safety segment reported a 1% revenue decrease for the current year. The segment had good sales growth compared to the prior year in biologics, which was up 12%, and Neogen gained market share in sales of various needles and syringes. These increases were offset by lower sales of animal care products, other veterinary instruments, and rodenticides, due to lost toll manufacturing business.

Neogen’s worldwide animal genomics business recorded a broad-based increase of 12% in fiscal 2019 compared to the prior year. The solid performance in this business was due to strong increases in beef sales in key global markets such as the United States, Europe, Brazil and Australia, due to new products and increased market penetration. Other major factors positively impacting the business were significant increases in companion animal testing.

Neogen Corporation develops and markets products dedicated to food and animal safety. The company’s Food Safety Division markets dehydrated culture media and diagnostic test kits to detect foodborne bacteria, natural toxins, food allergens, drug residues, plant diseases and sanitation concerns. Neogen’s Animal Safety Division is a leader in worldwide biosecurity products, animal genomics testing, and the manufacturing and distribution of a variety of animal healthcare products, including diagnostics, pharmaceuticals and veterinary instruments.

Certain portions of this news release that do not relate to historical financial information constitute forwardlooking 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.

(In thousands, except for per share and percentages)
  Quarter ended May 31 Year ended May 31
  2019 2018 2019 2018
 Food Safety $56,428 $51,667 $213,474 $194,477
 Animal Safety 53,334 56,453 200,712 203,453
Total revenue 109,762 108,120 414,186 397,930
Cost of sales 59,232 59,622 222,266 211,659
Gross margin 50,530 48,498 191,920 186,271
Operating expenses
 Sales & marketing 17,776 17,488 70,230 66,929
 Administrative 10,454 9,197 40,791 38,294
 Research & development 3,570 1,954 12,805 10,855
Total operating expenses 31,800 28,639 123,826 116,078
Operating income 18,730 19,895 68,094 70,194
Other income 768 36 4,865 3,271
Income before tax 19,498 19,895 72,959 73,465
Income tax 3,683 2,350 12,783 10,250
Net income $15,815 $17,545 $60,176 $63,215
Net loss (income) attributable to non-controlling interest 0 0 0 (70)
Net income attributable to Neogen Corp $15,815 $17,545 $60,176 $63,145
Net income attributable to Neogen Corp per diluted share $0.30 $0.33 $1.15 $1.21
Other information
 Shares to calculate per share 52,526 52,449 52,425 52,149
 Depreciation & amortization $4,596 $4,377 $17,624 $17,058
 Interest income 1,395 757 4,705 2,101
 Gross margin (% of sales) 46.0% 44.9% 46.3% 46.8%
 Operating income (% of sales) 17.1% 18.4% 16.4% 17.6%
 Revenue vs. FY 2018 1.5%   4.1%  
 Net income vs. FY 2018 -9.9%   -4.7%  
(In thousands)
  May 31 
May 31 
Current Assets
 Cash & investments $267,524 $210,810
 Accounts receivable 82,582 79,086
 Inventory 85,992 76,005
 Other current assets 13,431 9,888
Total current assets 449,529 375,789
Property & equipment, net 74,847 73,069
Goodwill & other assets 171,364 169,151
Total assets $695,740 $618,009
Liabilities & Equity
Current liabilities $38,251 $38,688
Non-current liabilities 19,590 19,146
Equity: Shares outstanding
 52,217 in 2019 & 51,736 in 2018 637,899 560,175
Total liabilities & equity $695,740 $618,009

Category: Earnings