Neogen Corporation

Good day and welcome to the NIAGEN Corporation Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Bill Welke, Head of Investor Relations and Treasury. Please go ahead.

Thank you for joining us today for the discussion of the second quarter of our 2024 fiscal year. I'll briefly cover the non-GAAP and forward-looking language before passing the call over to our CEO, John Aidens, who will be followed by our CFO, Dave Naimura. Before the market opened today, we published our second quarter results, as well as a presentation with both documents available in the investor relations section of our website. On our call today, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliations of historical non-GAAP financial measures are included in our earnings release and the presentation. slide two of which provides a reminder that our remarks will include forward-looking statements within the meaning of the private securities litigation reform act these forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward-looking statements these risks include among others matters that we have described in our most recent annual report on Form 10-K and in other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements. With that, I'll turn things over to John.

Thanks, Bill. Good morning, everyone, and welcome to our earnings call covering the second quarter of our 2024 fiscal year. This is an exciting time in here, Jim. as we're approaching several near-term milestones on the journey of integrating the former 3M food safety business. Following the launch of our new ERP system in September, we made further progress by initiating the exit of several transition service agreements that we have with 3M, while continuing to ramp up our internal capabilities. On the manufacturing front, we also successfully completed the first phase of the relocation of the former 3M pathogen and sample handling product lines in the NEOGEN facilities. The final relocation of the sample handling production we now expect to complete in Q4, but otherwise remain on track to exit all transition agreements outside of petri-film manufacturing by the end of the third quarter. Moving to our results for the quarter, they were in line with the expectations we communicated on our last earnings call, with second quarter revenue and adjusted EBITDA margin modestly ahead of the first quarter. The backlog of open orders we mentioned on our last earnings call remained at the end of the second quarter, primarily affecting legacy Neogen food safety products and negatively impacting our core revenue growth by approximately 300 to 400 basis points. We are encouraged by the orders we have in hand and are prioritizing working through the current backlog. In our food safety segment, while core revenue grew modestly, it would have been up in the mid-single-digit range absent the elevated open order backlog. We experienced solid growth in petri foam compared to the prior year, and we saw an acceleration in Asia Pacific from the first quarter, with Japan and China showing improvement through a combination of winning back and replacing share that was lost due to historical inconsistencies in supply from our transition manufacturing partner. The strongest performance in food safety came in pathogen detection, where we leveraged the complementary neogen and 3M microbiological capabilities to win new business in a core product category where we see significant growth opportunities. In our animal safety segment, the distributor destocking we've been experiencing moderated in the quarter. Inventory levels in the channel remain low, but the overall stocking was at a reduced rate. Excluding genomics, where sales do not go through distribution, core growth in animal safety saw a nice improvement from Q1 with the rate of decline in Q2 improving by 400 basis points. In genomics, we are seeing some incremental headwinds from the strategic shift to focus to larger, more profitable production animals, as well as companion animals. Although the environment remains dynamic, we are encouraged by the signs of improvement we've seen in our end markets. In addition to the moderating destocking in animal safety, the end-user demand backdrop remains stable for the first quarter. On the food safety side, inflation is beginning to ease, albeit slowly, and there is a general view that a continuation of this trend will lead to volume inflection for food producers in calendar 2024. We view these as positive developments, but with the greater visibility the first half of the year now affords us, We believe these improvements are happening at a slower pace than our four-year outlook had originally contemplated. Accordingly, we are updating our four-year outlook to reflect the current view of these impacts, including the strategic shift underway in our genomics business. With the largest external challenges we've been experiencing seemingly beginning to stabilize, Our focus remains on the value creation opportunity we have through continued progress on the integration of the former 3M food safety business, while positioning ourselves to capitalize on an improved end market environment. Now I'll turn it over to Dave for some more insights into our results for the quarter.