Neogen Corporation (NASDAQ:NEOG) Q3 2023 Earnings Call Transcript

David Westenberg : Got you. I appreciate you being able to parse out my terrible phrasing. So secondly, just on the Petrifilm and the manufacturing that on — maybe I should say the failure to fully get your — all your orders in from your supplier here. Can you talk about how you’re prioritizing the products for your competitors and — I mean, sorry for your customers. And kind of what I’m getting at with this is keeping this product in the hands of your customers to make sure that maybe they’re not dual sourcing or they’re sticking with you through the process, can you maybe talk about some of the discussions you’re having with the customers to make sure they feel that you’re on — as the middleman that they’re taken care of, and I guess some of this is out of you control, because you’re just — you’re in between the two?

John Adent: Yeah, so what we’re doing, David, is to point that out on the SKUs, we’re having issues because we don’t have it on every issue. We don’t have it on every SKU, in Petrifilm or even in sample . It’s on the SKUs that are an issue. We end up allocating, and we end up working with customers to make sure that we’re trying to do the best but that we’re just not meeting their demand. We’re not getting the manufacturing support we need. And because of that — because it’s a consumable, they have to go and do something else. So by definition, we’re losing that sale, and that share of market at that moment, because they’re having to go for that to continue to test. Now we know it’s a very resilient business. And we know that our solution is better.

So we’re very confident that we’re going to be able to get those customers back. But that is a sale, we lose that we don’t get back. It’s not like they can just say, well, we’ll wait until you’re ready, and you guys have enough. And then this excess build-up of demand comes back later in future sales. So that’s why we’re working so hard at it. That’s why it’s so frustrating to me and the team. And that’s why we’re so focused on communications with the customers to make sure that the products that we have — even though it’s not enough, we’re trying to work with them in a way on an allocation basis to easily make this the least painful, but we recognize this is extremely painful for our customers. I’ve talked to our customers almost every week about this.

I know they’re frustrated. They know we’re frustrated. We’re seeing some incremental progress, but we’ve got a lot more work to do.

David Westenberg : Got it. In terms of — is there any other maybe technical issues or invoicing issues with Petrifilm? I mean, like, is the experience right now just kind of a stock out and everything else from the transition is going pretty fine right now and you feel comfortable that that frustration is isolated to really the product.

John Adent: Yeah. The biggest issue is manufacture. It’s not logistics, it’s not — there’s nothing in the order to cash cycle. We don’t see any issues with billing or receiving or anything like that. It’s purely a manufacturing issue. And Brandon kind of brought this up about what ’24 looks like. During fiscal year ’24 some of those lines will be coming over to us, just petri for now, but sample handling, portions of that will be coming over and even the pathogen side. So we’ll feel a lot more comfortable. And we’re working very hard to continue to move some of those products into our manufacturing and into our hands even at an accelerated rate than we were anticipated, because we know we can get that fixed. So those are some of the things we’re doing.