Neogen Corporation

Good morning, ladies and gentlemen, and welcome to the Neogen Corporation first quarter 2025 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, October 10, 2024. I would now like to turn the conference over to Bill Welke, VP, Investor Relations and Treasury Investors. Please go ahead.

Thank you for joining us this morning for the discussion of the first quarter of our 2025 fiscal year. I'll briefly cover the non-GAAP and forward-looking language before passing the call over to our CEO, John Adant, who will be followed by our CFO, Dave Nemura. Before the market opened today, we published our first quarter results as well as a presentation with both documents available in the investor relations section of our website. On our call this morning, 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 the earnings call for the first quarter of our 2025 fiscal year. At the beginning of September, we crossed the two-year anniversary of the closing of the 3M food safety transaction, which solidified our position as the largest player with the broadest product portfolio and geographic reach in an attractive and important end market. That transaction strengthened our company in the food safety end market where we generate approximately two-thirds of our revenue from products and solutions that help protect the food supply. We provide an important and relatively inexpensive line of defense in the rapid detection of contaminants in the production and distribution of food and beverages. We believe the food safety market has a number of secular tailwinds. One of these tailwinds involves the expected increase in various food testing regulatory requirements around the world, We saw another example of this recently in the U.S., with the USDA's declaration of salmonella as a known adulterant in raw, breaded, and stuffed chicken products, joining E. coli and listeria as the other known pathogen adulterants in different food types. The USDA and other international regulatory bodies continue to focus on reducing severe illness and fatalities stemming from foodborne pathogens. and we anticipate the emergence of additional regulatory requirements in the future. Other key tailwinds in the food safety market include the increasing expectation from consumers to know what is in and not in their food, as well as the high cost associated with contaminated products reaching the shelves. Beyond the obvious tragic consequences that can result from consuming contaminated food or beverages, the cost to companies of the associated product recalls litigation, brand damage, and even facility closures can be tremendous, as evidenced recently by several unfortunate high profile outbreaks. These occurrences reinforce the value proposition of Neogen's solutions and industry expertise, which have never been more relevant than they are today. Our commercial teams have been engaging in an increasing number of these conversations with customers, offering not only the breadth of our products and services, but also the longstanding knowledge and expertise we can provide in structuring robust food safety testing programs. We expect these factors to continue to support growth in the food safety end market and a continuation of the progress we've made in expanding and, in some cases, winning back market share. In animal safety, we continue to manage through end market conditions we believe are at or near cyclical lows. particularly in the United States where most of our business in this segment is focused. Our animal safety sales are influenced by net farm income, which after peaking in 2022 in the U.S., declined in 23 and is declining again in 2024. The majority of our business in this segment goes to large distributors, and despite weaker conditions, sales of our products out of the distribution channel have continued to grow. However, our sales to our distributor partners are subject to movements in the timing of orders and inventory levels, as well as any other factors or initiatives specific to individual distributors. In the first quarter, some of our key distributors reduced inventory levels due to order timing from the fourth quarter, while others did so as a result of some specific challenges they're experiencing in their particular business. We are not seeing the indications of a destocking trend and believe the sales out of our products support and improvement in our animal safety growth rates in the coming quarters. And of course, we'll continue to monitor the channel dynamics closely. In our genomics business globally, first quarter revenue was down on a year-over-year basis, but improved from the decline we saw in the fourth quarter. We began to round-trip the impact of the strategic shift towards larger production animals in the quarter and did see growth in our large animal business. This growth was offset by weakness in the companion animal side of the business, driven by lower number of new puppies and increased inflationary pressure on customers. We are continuing to focus on driving growth in the direct-to-producer beef and dairy segments, while also targeting actions to right-size the cost base to better align with the current level of revenue. With respect to our integration progress, The ERP-related challenges that we've been experiencing in our primary distribution center have been resolved, and we no longer are constrained by shipping. That being said, we do see opportunity to drive improvements in the efficiency of that operation, and our teams are focused on executing a number of initiatives there. On the production side, we've completed the relocation of the former 3M sample collection product lines. While we've been in the process of ramping up our production, we haven't been able to fully keep up with end-user demand, which weighed on our sample collection sales in the quarter. We currently have all lines operational with the line of sight to reach normal production levels in the third quarter. Our new Petri film facility is progressing well, and the first of our two major shipments of equipment is expected to land in Lansing in January. It will take several months to uncrate everything and get it moved into the new buildings. but the receipt of the equipment is clearly an important milestone in that process. With the recent shipping challenges behind us, regaining market share is a top priority. The response to our initial efforts in this area have been encouraging. We are a known and trusted partner in the industry with leading products that are globally validated, and most customers are primarily focused on a demonstrated period of reliable supply. Because of this, share recapture will not happen overnight. but the progress we've made so far is in line with our expectations. Our commercial teams are executing detailed tactical plans that are driving constructive dialogue with previously impacted customers, and we're looking forward to continuing to demonstrate our capabilities as a reliable, knowledgeable source of leading food safety testing solutions. I'll now turn the call over to Dave for some more insights into our results for the quarter.