Neogen (NASDAQ:NEOG) Corporation (NASDAQ: NEOG) reported solid core revenue growth in its Third Quarter 2024 Earnings Call on April 9, 2024, despite shipping inefficiencies that led to revenue and earnings that fell short of expectations.
The company, which operates in the Food Safety and Animal Safety sectors, is in the midst of operational changes, including the relocation of product lines and the construction of a new facility.
While facing integration challenges and increased operating expenses, Neogen remains optimistic about its market position and future growth, updating its full-year revenue guidance to between $910 million and $920 million and adjusted EBITDA to be in the range of $210 million to $215 million.
Key Takeaways
- Neogen reported mid-single digit core revenue growth in both Food Safety and Animal Safety segments.
- The company completed the relocation of the former 3M pathogen detection product line and is progressing with the sample handling product line's relocation.
- A new Lansing facility is under construction for the Petrifilm line, with plans to start production independently.
- Shipping inefficiencies resulted in a higher backlog of open orders and are expected to impact near-term shipments.
- Full-year revenue guidance is updated to $910 million to $920 million, with adjusted EBITDA between $210 million and $215 million.
- Gross debt stands at $900 million, with a total cash position of $168 million.
- Adjusted net income and earnings per share remained flat year-over-year.
Company Outlook
- Neogen anticipates growth opportunities and improved end market conditions.
- The company is focused on product development in pathogen detection and food quality analysis.
- Expectations for an easier year for growth in the next fiscal year with better margins in 2025.
Bearish Highlights
- Integration challenges have led to increased operating expenses and logistics inefficiencies.
- Margins declined due to these increased costs.
- Supply issues have resulted in potential share loss from customers.
Bullish Highlights
- Strong growth in biosecurity products and vet instruments.
- Stabilization in the Genomics business with a shift towards the large animal market.
- Approval of a new molecular detection assay for Salmonella Serotypes.
Misses
- Revenue and earnings fell below expectations due to shipping and operational inefficiencies.
- Significant costs in the SG&A line from outbound logistics issues.
Q&A Highlights
- CEO John Adent expressed frustration with the integration process but confidence in achieving future growth targets.
- Adent acknowledged the potential customer share loss due to supply issues but expects improvement once resolved.
- The company is making progress in improving warehouse efficiencies.
Neogen's Third Quarter Earnings Call revealed a company in the midst of significant operational changes, with the CEO acknowledging the challenges but remaining confident in the company's resilience and growth potential.
Despite the hurdles, Neogen's strategic focus on product development and market leadership positions it to capitalize on future opportunities as it works through current inefficiencies. The company invites stakeholders to join the next call at the end of the fiscal year for further updates.
InvestingPro Insights
Neogen Corporation (NASDAQ: NEOG) has shown a promising core revenue growth, which is reflected in the latest financial metrics. According to InvestingPro data, the company has a market capitalization of $2.82 billion, underscoring its significant presence in the Food Safety and Animal Safety sectors.
InvestingPro Tips indicate that Neogen is expected to see net income growth this year, which aligns with the company's optimistic revenue guidance update. Additionally, the company is currently trading at a high earnings multiple with a P/E ratio of 239.44, which suggests that investors may be expecting higher earnings in the future. This is further supported by the adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at 110.63.
Another key metric to consider is the company's liquid assets position, which exceeds its short-term obligations, hinting at a strong liquidity status that could help Neogen navigate through its current operational changes and potential growth phases. Moreover, Neogen is trading near its 52-week low, which might present a buying opportunity for investors who are bullish on the company's long-term prospects, especially considering that analysts predict profitability this year.
For those interested in more in-depth analysis and additional insights, InvestingPro offers a total of 9 tips for Neogen, which can be accessed at https://www.investing.com/pro/NEOG. Remember, using the coupon code PRONEWS24 will get you an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing even more value as you follow Neogen's journey through its operational changes and market growth.
Full transcript - Neogen Corp (NEOG) Q3 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Neogen Corporation Third Quarter 2024 Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Tuesday, April 9, 2024. I would now like to turn the conference over to Bill Waelke. Please go ahead.
Bill Waelke: Thank you for joining us this morning for the discussion of the third 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 Adent, who will be followed by our CFO, Dave Naemura. Before the market opened today, we published our third quarter results, as well as the 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 2 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.
John Adent: Thanks, Bill. Good morning, everyone, and welcome to our earnings call for the third quarter of our 2024 fiscal year, which saw us complete a number of milestone achievements on our integration journey. We completed the relocation of the former 3M pathogen detection product line and are now manufacturing in one of our Lansing facilities. We also completed the first-two of our four phase relocation of a former 3M sample handling product line to one of our facilities in Lexington. With the remaining two phases expected to be completed by the end of the fiscal year and production beginning in Q1. The manufacturing of Petrifilm will continue under the current transition agreement until we have our own Petrifilm line operational in our new facility in Lansing. The construction of the facility is almost complete. Work has begun outfitting the interior, and we have taken delivery of several initial shipments of production equipment, but the more significant shipments expected to arrive in the fall. Our plan is to exit the Petrifilm transition agreement gradually, as we first qualify and then ramp up our own production. The initial term of the Petrifilm agreement ends in August of 2026 with our goal clearly being to exit before that time. Over the past several quarters, we've scaled up our back office and distribution capabilities. And during the third quarter, completely exited the transition services and distribution agreements we have with 3M. This, in combination with the related system implementation has, however, created inefficiencies in our operations that we're continuing to work through. These inefficiencies have negatively affected the rate at which we're able to meet end user needs and ship products to customers. This has contributed to an extended period with a higher than usual backlog of open orders that invariably has negatively impacted demand when our products have not been readily available. In most instances, we believe these situations represent lost sales more than lost customers, but there are clearly some customers we're going to have to win back. Moving to the results of the quarter. We had solid core revenue growth in both segments, although, it was below our expectations due to the aforementioned shipping inefficiencies. We're encouraged though by the continued improvements we've seen in the end market environment. On the Food Safety side of the business, most food producers saw continued sequential improvement in unit production volumes, a trend that we expect to continue. Our Food Safety core revenue grew in the mid-single digit range led by another strong quarter of Petrifilm sales, including a return to growth in Japan, where we had previously experienced some customer attrition due to supply constraints. In Animal Safety, destocking in the large veterinary distributors was no longer a headwind. While the inventory levels having normalized and some distributors having selectively begun to rebuild inventory in certain product categories based on end market demand. Our core revenue growth in this segment was also in the single-digit range, led by our broad portfolio of biosecurity products and vet instruments. Excluding our Genomics business, Animal Safety core revenue growth in the quarter was strong, up in the mid-teens range, albeit on an easier compare against a destocking quarter in the prior year. In Genomics, we're seeing the business stabilize as we shift our focus towards the large animal end of the market. Although, still down on a year-over-year basis, we did see core revenue trend positively for the second quarter. While the end market environment is improving, we are updating our full year outlook to reflect the expected impact of our shipping issues. We believe these challenges are temporary and that we will be able to recover the lost revenue, but we do expect to see a near-term impact on the lower shipments in Q3 and the rate we're carrying into Q4. It is clear that it will take additional time to get the shipping levels where they need to be on a sustainable basis to serve end market demand, resolving these challenges and meeting our customers' needs are our highest priority. On the product development front, we continue to see benefits from our broadened R&D capabilities, particularly, as it relates to our pathogen detection product offering. We recently received approval of a new molecular detection assay from AOAC, which is an independent body of analytical science professionals that validates testing methods for the Food Safety industry. This new assay, which we expect to officially launch later this month, provides rapid and specific detection of two Salmonella Serotypes that are highly relevant for the poultry industry. We believe this assay utilizes a simpler protocol and is more user-friendly than competitive options and it allows users of the Neogen molecular detection system platform seamlessly run these additional serotype tests. Pathogen detection is a significant area we are focused on to drive growth, leveraging the complementary product technologies and technical capabilities of our combined organization. We also continue to drive innovation in our food quality and nutritional analysis business. We have recently developed a testing method utilizing proprietary technology that allows bioethanol producers to determine how much of their production is from cellulose versus starch-based raw materials. This test is the first to market of its kind and can provide significant value to these producers as they're able to command a premium for cellulose based bioethanol. Food quality and nutritional analysis is an attractive market. But we're excited about the additional opportunities we have to capitalize on the demand for greater visibility and food content overall. When we made the strategic decision to expand our scale and solidify our position as the global leader in food safety by acquiring the former 3M Safety division, we recognize that would be a complex and challenging carve-out and integration of the business. While I am not pleased with the present inefficiencies, we are committed to navigating the challenges and ultimately realizing the long-term benefits of this combination. I'll now turn the call over to Dave for some more insights into the results for the quarter.
David Naemura: Thank you, John, and welcome to everyone on the call today. Jumping into the results. Our third quarter revenues were $229 million. Core revenue, which excludes the impact of foreign currency, acquisitions and discontinued product lines grew over 6% for the quarter, while foreign currency was a headwind of 140 basis points compared to the prior year. As John mentioned, this growth was impacted by our shipping inefficiencies as we did not reduce our past due backlog as we had planned and our extended lead times negatively impacted demand. Moving to the segment level. Revenues in our Food Safety segment were $158 million in the quarter, an increase of 4% compared to the prior year, including core growth of almost 6%. The core growth was led by the indicator testing, culture media and other product categories, which benefited from double-digit growth in our Petrifilm and sample handling product lines, primarily driven by North America and Europe. Within the natural toxins and allergens category, solid growth in allergens from tree nut test kits and improved product availability in North America was offset by a decline in natural toxins due mainly to reduced product availability. The bacterial and general sanitation product category saw growth in microbiology and general sanitation partially offset by a decline in pathogens, due primarily to the shipment delays to Latin America and Asia. Quarterly revenues in the Animal Safety segment were $71 million, which includes a core revenue increase of 7% compared to the prior year quarter. We saw the destocking trend normalize with non-genomic sales that go primarily through distribution, up 15% on a core basis, a significant improvement from the second quarter. We saw core growth in all major product categories, led by our biosecurity portfolio, a result of new business wins and increased demand related to the ongoing ABM flu outbreak. Our vet instruments and disposables products also experienced strong growth due mainly to higher sales of detectable needles and syringes. Finally, in the Animal Care and other category, similarly strong growth was led primarily by higher sales of vitamin injectables and biologics. Worldwide genomics revenue was down mid-single digits on a core basis, which marked a slight improvement from the second quarter. The decline continued to be driven by small production animals, reflecting the strategic shift away from this end of the market. The effects of this strategic shift in focus offset growth in Europe and in dairy genomics in China. From a geographical perspective, core revenue growth was mixed. Growth was led by North America, which grew high-single digits from strong growth across most key product categories, including Petrifilm, pathogens, sample handling, hygiene monitoring, biosecurity and vet instruments. Our business in Europe grew mid-single digits on a core basis with strength in Petrifilm, pathogens and sample handling as well as genomics. Asia-Pacific core revenue was roughly flat on a year-over-year basis with strong growth in allergens, biosecurity products and genomics, offset by declines in pathogens and sample handling. Notably, we saw a return to growth in China and Japan, including Petrifilm, which had been challenged by some lost customers due to product availability issues. In Latin America, core growth was also roughly flat after strong growth in the second quarter. Higher sales of allergen test kits, biosecurity products, vet instruments and genomic services were offset by lower sales of culture media, pathogens and sample handling products due in part to shipping constraints impacting our export levels. Gross margin in the third quarter was 51.1% representing an increase of 160 basis points from 49.5% in the same quarter a year ago, with the margin expansion driven primarily by the recovery in sales of the former 3M products, particularly Petrifilm, compared to the prior year Q3. Adjusted EBITDA was $53 million in the quarter with an adjusted EBITDA margin of 23%, representing a year-over-year decline of 50 basis points. The margin decline resulted from growth in operating expenses more than offsetting the gross margin improvement. During the last 12 months, we have added costs to extract ourselves from the transition service agreements and also experience certain inefficiencies, mostly in logistics as we work through the integration of distribution activities. Finally, we have added additional investment that contemplated the business being at a higher operating level, and we are planning to address those costs and others during Q4. Adjusted net income and adjusted earnings per share were essentially flat to the prior year quarter at $26 million and $0.12, respectively. The higher adjusted EBITDA in the current year Q3 fell through to adjusted net income at a lower rate, primarily due to higher depreciation expense related to our ERP implementation. We ended the quarter with gross debt of $900 million, 67% of which remains at a fixed rate and a total cash position of $168 million. Cash was impacted by planned integration CapEx and further purchases of finished goods inventory as we exited the 3M distribution network. Cash was further impacted by an elevated accounts receivable balance, driven mostly by the back-end loaded nature of the quarter as well as the semiannual interest payment on our bonds. As John mentioned earlier, we are encouraged by the positive direction in which our end markets are trending. However, the impact from our shipping efficiencies impacted Q3 and will continue in Q4 at a rate higher than previously anticipated. As a result, we are updating our full year guidance and now expect revenue to be between $910 million and $920 million and adjusted EBITDA to be in the range of $210 million to $215 million. We continue to expect full year capital expenditures of approximately $130 million, including integration related capital expenditures of approximately $100 million, the majority of which we do not expect to repeat next year. I'll now hand the call back to John for some closing thoughts.
John Adent: Thanks, Dave. The third quarter marked a significant step in the integration and our ultimate journey towards full autonomy as a combined business. Certain aspects of the integration, however have taken longer than we anticipated and while the operational inefficiencies we are currently experiencing are disappointing. We have our arms around the key issues and are fully committed to resolving them in the near future. We expect to return to more typical growth levels, but have initiated a comprehensive review of our operating infrastructure to identify where we can better balance investments in the business with the growth that we've seen this year and the growth we expect to achieve given our leadership position in an attractive end market. The integration process we've made has also come a substantial investment in working capital or CapEx this year, which we expect will reduce significantly in 2025. We've spoken in the past about reviewing different parts of our portfolio and that work has accelerated. Importantly, the external market weaknesses we have been navigating for the past several quarters is improving. Unit production volumes in the food industry are still mostly negative, but are improving and Animal Safety distributor inventory levels have largely come back in the balance. It is our job now to address the internal challenges from the integration to capitalize on the improving end market environment and also bring back customers who may have gone elsewhere during inconsistencies of supply and we will. Our team members around the world have worked tirelessly and continue to do so, not only on integration but also on positioning the company to capitalize on its multiple long-term growth opportunities. I want to thank them again for their efforts and dedication. Now I'll turn things over to the operator to begin the Q&A.
Operator: Thank you, ladies and gentlemen. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from David Westenberg with Piper Sandler. Please go ahead.
David Westenberg: Hey, yeah. Thank you for taking the question and good morning. So just can you talk about some of the working capital inventory, of course, you had the unability to fulfill. But just as we're projecting kind of the working capital cash flow, I think you said fulfillment won't completely get done in Q4. But can you just kind of talk about how that inventory is going to kind of like trend into Q4 and then into the first half. And I get that there's a lot of moving parts, and you're not exactly giving guidance on free cash flow and kind of what that's kind of moving, but just help us understand conceptually what's going on as we model forward?
David Naemura: Yeah. Thanks, David. If we look at the quarter itself, this was the second quarter in a row where we brought 3M finished goods inventory into our distribution channel. So we've brought in between Q2 -- mostly in Q2 and Q3 about $48 million of inventory, which should be the size of the transfer here. There were some other cash outflows in the quarter, some of them planned. Integration CapEx was about $23 million in the quarter, and we think -- we believe we're on track for the full year estimate of around $100 million of integration CapEx plus $30 million of recurring. Receivables was higher in the quarter as a result of the back end loaded nature of the quarter as we ramped throughout the quarter. But to your point, as we've come off the order to cash cycle at 3M to have that fully in-house, there are some moving pieces. At the beginning of the year, we talked about full year free cash outlook for the year at about flat, albeit a bit of an aspirational number given the desire to improve working capital on the legacy side of the business. Improving working capital, we're seeing some of that, but we are hampered in inventory on the legacy side of the business. But more -- so I would say all other things being equal, we would not be flat, we would be off maybe 25 to 30 full year, but two additional headwinds to that principally are higher 3M inventory. We had thought 40, it's coming in now, call it, 50, 48 and then, of course, lower EBITDA for the year. And we think that all results in a free cash -- negative free cash full year of around 75 with agreeing with your caveat that there are a lot of moving pieces, as we work through the integration and the impacts on inventory of the inefficiencies in the plant. Kind of the last part of your question, looking forward, not ready to go there. We think significant though step down integration CapEx. So we see an improvement year-over-year from that as well as the impact of better efficiencies and better linearity in the quarter, all towards going to what you've heard me say before is I believe once we get through integration, a 100% free cash conversion basis here.
David Westenberg: Got it. No. That's a lot of great detail, Dave. Sorry, John, I cut you, didn’t I.
David Naemura: No. Go ahead.
David Westenberg: Okay. Got it. Specifically, can you talk about what's left in integration. I know there's -- I think, it's indicator testing and sample handling is kind of what's left. Can you kind of give us some of the dates here for further details on dates. And can you just remind us what's going through the facility? I mean what you're kind of in-housing to Lansing, just to kind of give us an indication of what key product categories might have to deal with some of the integration left? And just to confirm and sorry, squeezing in one more and I promise this is the last one. Is every facility now on SAP and all the ERP stuff is now behind you? Sorry, I know that's a lot. Thank you.
John Adent: Yeah. Thanks, David. So regarding the integration, we've done two phases of the four phase step for sample handling. So we expect sample handling to be completed, majority will be done in the fourth quarter and be done by Q1, so that's the one piece we have with the sample handling piece. Again, Petrifilm, the plant is pretty much done. We've started to bring in shipments already of equipment and setup. We expect the majority of those shipments of the main equipment to be coming in during two, three quarters. Again, the indicator goes through 2026, but our plan is to move off of that as judiciously as we can. And again, it's not a hard cut. Remember, we're doing the ramp up, ramp down, where we have indicator testing Petrifilm being made in two plants today on the 3M side. And as we qualify ours and ramp up production will start to draw there. So we feel like supply from that will be -- we can handle that fairly well because it's not a hard cut off like we did on some of the other ones. Pathogen testing is done. That's in our facility in Lansing, so that's a big milestone, and we're very excited about bringing that in-house and the growth we've had in those areas. Regarding SAP, the major facilities in the U.S. are already on SAP. We are not going to do a full rollout on some of the international locations are just too small. We have SAP light, so to speak, SAP1, and some of our external locations, but you remember a lot of our international businesses don't have manufacturing, they're just real sales and distribution offices. So that's why we're not going to roll it out across the country or across the world. It doesn't need to do that.
David Westenberg: Got it. Thank you so much for the detail.
David Naemura: Yeah.
Operator: Your next question comes from Brandon Vazquez with William Blair. Please go ahead.
Brandon Vazquez: Good morning, everyone. Thanks for taking the question. I wanted to focus a couple of kind of near-term questions first. On – first, on the inefficiencies of kind of integrating the 3M business. Did they get worse quarter-over-quarter? I think last quarter, you were talking about a $10 million headwind. I'm not sure if you guys were giving a number this quarter on what that headwind was. But -- maybe just talk about sequentially, I think there was some hope last quarter that things would have improved into the -- through the rest of the fiscal year. Are things kind of going that way? Do you guys think you have a handle on what needs to be done and what is that, and what gives you the confidence to be able to do that?
David Naemura: Brandon, good morning. It's Dave. Let me add a point or two and then pass it to John. If we think of back orders or in-house orders that are unfulfilled that was about flat from Q2 to Q3. And as you'll know, as you point out, we were hoping to make improvement there. The impact to demand is tougher to measure. But recall that the legacy side of the business, we were shipping through this under this new format for all of Q2, but only about half of Q2 where we're shipping 3M and we're shipping obviously both for the full third quarter. So the actual ramp, which John can talk about more was greater than, I think, appears when we see flat revenue sequentially. Before I'll pass it to John, I would say there's a significant amount of cost in the SG&A line from our outbound logistics that manifest from a number of areas, but from shipping, partials, to other inefficiencies that come to as well. So we see it both on the top line side and on the OpEx side. I'll turn it to John.
John Adent: Yeah. Thanks, Dave. So Brandon, the big issue we have is getting orders to drop in the warehouse from SAP to the SAP module of EWM. And we've got SAP fully engaged with us with our integration partner, PwC and our teams try and drive this. And when we talk about the efficiencies, let me quantify it for you a little bit. So in Q2, about 40% of our shipments happened in less than five days. In Q3, that went up to 80%, right, so we're making progress. Now the goal is, 24 hours, right? You order today ship tomorrow. That's what we've done for years and years. So you saw what happened to our efficiency. I think the other thing to remember is, as Dave talked about our shipping in total dollars has grown exponentially because we brought in the 3M business, where -- we shipped in Q3 152% of what we shipped in Q2. And if you think about Q1, it was 175%, right? So we really are ramping up the amount of products going out of our warehouse. So every day, we set new records on what we're shipping out, but we have to get that turnaround time back to 24 hours, and that's what we're going to do.
Brandon Vazquez: Okay. Maybe another near-ish term question, but a little more specific on the margins, maybe for Dave. Look, I know we don't have perfect numbers here, so I'm doing rough math. So correct me if I'm off the mark, but if I'm still assuming the 3M business is high 20s, 30% EBITDA margin, it kind of implies a Neogen kind of legacy business that's 3 points or 4 points below what it historically used to be arguably even potentially a sub-20% EBITDA margin. I guess, one, are we -- is that math ballpark correctly? And then two, is that really just all from operational efficiencies.
David Naemura: There's a couple of components here, Brandon. I think it's difficult at this stage in the game to try to look at it as two separate P&Ls. I think going back to kind of history is a little tough there. But I think underlying your question is the fact that we've added a significant amount of cost that is necessary to come off the transition agreements and other investments to kind of operate at our new $1 billion-ish company size and by our own admission, we're not where we thought we would be from a revenue scaling standpoint. With the high fall through, that's been more impactful than we would like to have seen here, and that's something that we need to profitably rephase here as we move into the next year, given kind of the current profile of the ramp. Now we know the business can come back in a hurry once we get through some of these issues. But since we're behind, we need to probably address the cost structure to some degree as well.
Brandon Vazquez: Okay. And Dave, on that same note, on a follow-up to that. As we start kind of thinking about our fiscal '25 numbers, I appreciate you guys will give an official guidance on the next quarter probably, but how should we think about the progression of how these things get rectified over the coming quarters and how that kind of translates into EBITDA margins on a go-forward basis, even if you just talk high level without giving you specific numbers.
David Naemura: Yeah. Let's see where we're at, at the next quarter to your point. But I think what's fair to say about next year is, we should have a bit of an easy compare that's going to help growth next year given some of the constraints we've had this year. So assuming we rectify things in the time lines that we believe we can that will be helpful on the growth side. And obviously, we would see '25 as a better margin year that we've experienced here in '24. Beyond that, I want to be careful and those are the same things you would assume. I know, Brandon, but let's get a quarter from now, and we'll bring something more full so.
Brandon Vazquez: Okay. And one last one for me, sorry for a bunch of questions this morning. But maybe, John, for you, as you look high level at the deal, there's clearly, we've all talked a lot and done a lot of work on this, and it seems like there's a lot of opportunities for the company, but as you look at now kind of a couple of years into this, you're talking a little bit of potential share loss from some customers that you have to go back and win back. What's your confidence? How do you feel about kind of still eventually hitting. I know timing is uncertain, but is this structurally a business that can still do high-single digits plus growth and a 30% plus EBITDA margin or is there some work that needs to be done in order to give you the confidence that the level that this company can be at? Thanks, guys.
John Adent: No, I think you're right, Brandon. I mean the issue is going to be around the timing, but absolutely, it can, because again, when we talked about those numbers that was always our jumping off point from when the businesses are combined. And look, we knew this was going to be a challenging integration, right? We weren't the only business that looked at this that like the 3M business, but a lot of companies didn't want to take on this type of integration and carve out and we knew it was going to be challenging. I'm frustrated that it's taken us this long to get two modules between SAP to work together in a way that I think makes it easy for us to do business and so we're addressing that. I think it's a short-term issue because our customers are on a subscription basis and when we can't supply them, they can't just stop. So that's allowed some competitors to get qualified and come in. Now we've seen that when we have our product and our things in line that these customers come back as we have the best solution, but we've opened the door for some of the competitors to come in. Now we've seen when we have supply those customers come back. We've seen that with growth in other areas. We've seen that with the bounce back of Petrifilm around the world where we have supply and it comes back. So I feel very confident about that. But yeah, look, I'm frustrated and irritated, and you don't want to be sitting in my office because this is not generally how we efficiently run our operations. And while there's a lot of great things we've already done, and we made a lot of progress, I'm not pleased with where we're at today. So we're going to double down, make sure that we're going to get our customers' needs met. And once we get back to that, I think you're going to see really strong growth rates.
Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call over to the company.
John Adent: Well, thank you all for joining us today. We look forward to talking to you at the end of our fiscal year, and we'll talk to you soon. Thank you.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
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