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| Statement |
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| The Bacterial and General Sanitation product category saw the highest growth in this quarter with particularly strong sales of Clean-Trace Hygiene Monitoring products |
| In the former 3M Food Safety division, core revenue grew modestly on a pro forma basis, as John mentioned, which includes a compare headwind of a few points and also follows a very strong Q4 |
| Our sales and R&D teams are now approaching one year of working together on the combined product portfolio, building momentum that will result in new commercial opportunities, particularly as the market conditions improve |
| I'm really proud of the team on what we've been able to do under the SAP conversion |
| Having now crossed the one-year anniversary of the 3M transaction, we are excited about the opportunities we have to leverage our leading position in the Food Safety markets |
| That's why I said in prepared I was encouraged, because we're starting to see that move -- that move back, but it's -- it takes you two years to lose them and it's going to take us a little while to get them back, but I think we're really confident that our solution and our -- the things that we provide around our product portfolio of solutions and people are just head and shoulders above our competitors |
| As you heard today, we believe we're making solid progress on the integration of the former 3M business and are on track to be completely independent from 3M in the third quarter outside of Petrifilm manufacturing, but we feel that arrangement is in a stable place |
| Importantly, we were pleased to see that the improvements made in transition manufacturing during Q4 were sustained into Q1, providing stability of supply and allowing us to focus on demand-generating activities |
| So, like I said, the good news was the business was up and running, we were able to do all the functions, nothing stopped |
| Gross margin in the first quarter was 51%, representing an increase of 400 basis points from 47% in the same quarter a year ago with the increase primarily driven by the addition of higher margin business from the 3M Food Safety transaction, as well as positive price cost |
| However, outside of Asia Pacific, our Food Safety core revenue grew over 4% with positive volume despite the lower production volumes we see across much of the food production landscape demonstrating the resiliency of our business |
| In our legacy Food Safety business, core revenue growth was in the mid-single digit range, including positive volume growth in an end market where food production volumes continue to be down on a year-over-year basis for many producers |
| Backlog remains at reasonable levels following the progress in the prior quarter catching up on past due orders, which helped drive a strong fourth quarter |
| Although pro forma growth was lower in Q1, impacted by weakness in Asia, a tough comparison against some elevated activity last year and a strong Q4 where we caught up on fulfilling orders, we have seen good progress so far in Q2 and remain very optimistic about the opportunities ahead of us |
| And I'm really proud of the team and the work they've done and the ability to plan and execute kind of seamlessly to continue to move to the new Neogen and the One Neogen environment |
| We're seeing sequentially daily that that is improving day-by-day |
| So, we’re really excited about the future |
| Natural Toxins and Allergens also had solid core growth with a notable increase in sales of milk and gluten allergen test kits |
| These two product lines account for nearly 30% of the revenue of the former 3M business are a strong complement to the Neogen product portfolio that we're looking forward to have fully embedded within our operations |
| We're pleased with the progress we've made on the integration to date and are focused on the execution of the upcoming key transition activities in the second and third quarters that will bring the former 3M business closer to full autonomy within the One Neogen we're building |
| Our current base case view is that, we should see a modest sequential increase in revenue, which assumes we exit the quarter with an elevated level of open orders, as well as a modest sequential increase in adjusted EBITDA margin |
| As we operate through a rather dynamic market environment, we are encouraged by our performance |
| The core growth was led by the Bacterial and General Sanitation product category, which benefited from new microbiological testing business in the U.S |
| These declines were partially offset by solid growth in our biosecurity products with higher volumes in insect control products and cleaners and disinfectants |
| This is one of the good stories, right? We're 40 days in, we're immediately able to do order to cash, build customers, pick pack and ship, manufacturer, but we're just not as efficient and it's going to take us a little while to get that efficiency up, so we're caught a little bit behind |
| On a pro forma basis, gross margin expansion was 180 basis points |
| For the former 3M division in total, core revenue grew by approximately 1% in the first quarter on a pro forma basis |
| We've made significant progress across a number of fronts on the integration of the former 3M Food Safety business, while continuing to navigate soft market conditions |
| Sales out of the channel to our end customers remained positive compared to the prior year with large veterinary distributors continue to reduce their purchases |
| Adjusted EBITDA margin was 22.9%, a year-over-year increase of 250 basis points, including approximately 100 basis points of negative impact from a non-recurring billing adjustment from our transition manufacturing partner and transaction FX |
| Statement |
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| On a pro forma basis for the 3M transaction, core revenues declined modestly, down 40 basis points compared to the prior-year quarter or approximately $4 million to $5 million below our expectations, driven primarily by lower sales in Asia |
| Finally, APAC declined mid-single digits as a result of a slower-than-anticipated recovery in 3M demand following the Petrifilm supply constraints and also across-the-board softness in China |
| Albeit generally in line with our expectations, Animal Safety revenue was a bit lighter than anticipated, driven primarily by the continued destocking at large veterinary distributors |
| Quarterly revenues in the Animal Safety segment were $63 million, a core decline of just under 7% compared to the prior-year quarter |
| Our results for the quarter were largely as anticipated with two primary exceptions, greater than expected weakness in Asia and in genomics, along with a couple of unanticipated cost items |
| So, we had two large customers that are in very challenging markets right now, in poultry and swine and we're putting extreme pressure on pricing and other solutions for us |
| Our China exposure is small, representing less than 3% of total company revenue, but worsening macro conditions there contributed to significantly lower sales in the quarter |
| What we -- what we mean by that was, when 3M was struggling with their production of Petrifilm, APAC was asymmetrically hurt regarding supply |
| This destocking was the primary reason for the core revenue decline in vet instruments and disposables, while supply constraints played a role in the lower sales of small animal supplements and vitamin injectables in the Animal Care and Other category |
| For Neogen in total, we saw core revenue growth decline by 0.4% in the quarter on a pro forma basis, which includes a negative impact from China of approximately 1% |
| On the Food Safety side, we are dealing with a few challenges unique to us in Asia Pacific and macro weakness in China specifically, that is common in most companies |
| Recall that China represents less than 3% of our global revenues, but we experienced a decline in the high 20s, so the impact was measurable, particularly at the regional level |
| This growth was partially offset by a modest core revenue decline in Petrifilm with the largest driver being the aforementioned weakness in Asia and China, in particular |
| On a pro forma basis, adjusted EBITDA margin expansion was 10 basis points, lower than we had anticipated due to the non-recurring items I mentioned and volume being a bit lighter than expected |
| The inefficiencies he mentioned will make shipments more challenging in Q2, and we will likely have carryover of some Food Safety open orders into the initial weeks of Q3 as a result |
| I think some of the weakness in the quarter was coming from worsening macro, especially like in China, given update seem to be kind of negative out of there |
| And so, you had almost 24 months of supply disruption, which really challenged customers because they just -- they had to do other solutions and they had to find ways to continue to run their business without the Petrifilm product |
| Worldwide genomics revenue was down modestly on a core basis with growth in international beef markets, offset by declines in poultry and porcine, driven primarily by the attrition of a couple of large customers in the U.S |
| Core revenue, which excludes the impact of foreign currency, acquisitions, and discontinued product lines declined just over 1% for the quarter |
| On our Animal Safety segment, we continued to see the impact of destocking in the distribution channel |
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