Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Neogen Corp (NASDAQ:NEOG)
Q1 2020 Earnings Call
Sep 24, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Neogen First Quarter Fiscal Year 2020 Conference Call. My name is Adrienne and I'll be your operator for today's call. [Operator Instructions] Later we'll conduct a question and answer session. [Operator Instructions]

I'll now turn the call over to John Adent. John Adent, CEO. You may begin.

John Adent -- President & Chief Executive Officer

Thank you, Adrienne. Good morning and welcome to our regular quarterly conference call for investors and analysts. Today, we will be reporting on the first quarter of our 2020 fiscal year, which ended August 31.

As usual, some of the statements made here today could be termed as forward-looking statements. These statements, of course, are subject to certain risks and uncertainties. The actual results may differ from those that we discuss today. The risks associated with our business are covered in part in the Company's Form 10-K as filed with the Securities and Exchange Commission.

In addition to those of you who are joining us live by telephone conference, I also welcome those of you joining us via the Internet. Following our prepared comments this morning, we will entertain questions from participants who have joined this live conference.

I'm joined this morning by our Chief Financial Officer, Steve Quinlan, who will provide more detail on our results for the quarter.

Earlier today, Neogen issued a press release announcing the results for our first quarter. As stated in the release, our revenues were up 2% to approximately $101 million. Our net income for the first quarter was $14.7 million or $0.28 per share compared to last year's quarterly net income of $15.2 million or $0.29 per share.

As a bit of perspective on our net income performance, those first quarter earnings last year represented a 28% increase over the prior year, and that increase was primarily the result of higher deductions relating to employee stock option exercises, which contributed to an effective tax rate of 11% for the quarter.

In the quarter, we were once again, challenged by currency headwinds. In a neutral currency environment, our sales would have been $1.2 million higher this quarter. As with other international organizations, we're committed to riding out the difficult international business climate that all US-based companies now face.

While some of our businesses did well in the quarter, our overall results did not meet the performance expectations that we had for ourselves. Steve will detail some very strong performances that we had in the individual market segments, including our Genomics and Natural Toxin diagnostic test kits. He's also going to address some of the areas where we had weakness. Steve?

Steve Quinlan -- Chief Financial Officer & Vice President

Well, thanks, John. And welcome to everyone listening this morning. While John reported the overall sales and profit performance for the first quarter of fiscal year, the next few minutes, I'll give you some color behind those results and we'll start by discussing the performance of the Food Safety Group. We do continue to be impacted by fluctuations in currencies in the countries we operate in. As John mentioned, revenues would have been $1.2 million higher for the quarter in a neutral currency environment with the euro down 4% and the pound down 5%, each largely as a result of the Brexit uncertainty. The Chinese RMB declined 4% due in part to the continuing trade standoff with the US and the Aussie dollar declined 7% in the quarter. And about $1 million of that shortfall is in the Food Safety segment as the majority of the international businesses report in through this segment.

Revenues overall for the Food Safety segment was $51 million in the first quarter of fiscal 2020, and that's a decrease of 2% compared to $52.2 million in last year's first quarter. The currency issues impacted the segment, but there were other issues within our international businesses, which also affected our results.

Our Brazilian operations had a 42% increase in sales of food safety diagnostic products led by continued market share gains in aflatoxin sales during the country's corn harvest and an 18% increase in dairy antibiotic test kit sales, but lost a large commercial lab customer testing for drugs in commercial drivers in Brazil, as that customer changed to a higher throughput method for testing.

And as we noted in last year's first quarter, we had a non-recurring of about $1 million insecticide sale through

a government agency in that quarter. These two items offset the gains I discussed and the result was a decline -- a 16% decline in sales in Brazil overall in the current quarter. The lost forensic sales will impact the second and third quarters by approximately $800,000 each quarter and a lesser amount in the fourth quarter.

Our European operations had sluggish results for the quarter, with revenues up 1% in local currency, primarily on the strength of a 6% increase in our England-based cleaner disinfectant business.

Genomics revenues, which grew at a double-digit pace throughout 2019 and 24% in last year's first quarter, rose 4% in the first quarter of this year. These increases were partially offset by declines in culture media revenues, lower sales of our products to detect spoilage organisms due to a large equipment sale in the first quarter of the prior year and relatively clean crops after a mild DON outbreak last year in France. After converting to US dollars, revenues from the European operations declined by 4% for the quarter.

Neogen Latinoamerica, our business based in Mexico City, had strong 36% growth in sales of our Food Safety products led by mycotoxin kit sales due to an aflatoxin outbreak in corn in Mexico. Sales rose broadly across all of the diagnostic product lines. Sales of cleaners, disinfectants and rodenticides, however, dropped 32% due in large part to lower demand and delayed orders from larger customers and distributors. And this resulted in an overall increase in revenues of 5% for the quarter for this group.

Our operations in China were negatively impacted by the African swine fever outbreak in that country, which resulted in lower genomic testing for pork in the quarter and contributed to an 18% decline in revenue in China.

Our domestic food safety business only grew by 5% for the quarter, but there were some nice areas of growth within the business. Revenues for our industry-leading product line to detect inadvertent allergen contamination, which includes diagnostic tests to determine the presence of milk, peanuts, and processed soy among others, were up 11% domestically in the quarter.

Tree nut and gliadin test kits sales were particularly strong, up 45% and 17% respectively for the period. We've continued to strengthen our allergen test kit portfolio and recently added new tests for contaminants such as coconut. Our AccuPoint line, which is used to detect general sanitation and cleanliness in food processing environments, had a strong 12% increase in disposable sampler revenues during the quarter.

Our domestic natural toxin product lines -- product sales decreased 3% compared to last year's first quarter, due in part to the late planting of corn and other grains this spring caused by the severe weather, which has delayed the harvest of these crops. We believe that as the crops mature, we'll see an uptick in new sales in the second and third quarters.

Revenues for our test to detect the presence of antibiotics in milk declined by 8% in the quarter, due primarily to lower demand from our large European distributor. Our domestic culture media business declined 13% in the quarter. A number of our larger customers, particularly those in animal vaccine production, have pushed their orders for these products to the second quarter and second half of the year due to weakness in their markets.

Finally, we were unable to ship a number of readers for our product line to detect spoilage organisms such as yeast and mold due to back orders of a key part with one of our equipment suppliers. This resulted in an approximately $400,000 shortfall in readers sales for the quarter. These readers are expected to ship in the second quarter.

The Animal Safety segment continues to be adversely impacted by the ongoing trade impasse between the U.S. and China, which has disrupted our markets. However, it recorded revenues of $50.4 million for the quarter, up 6% over the $47.4 million achieved in last year's first quarter. This growth was driven by a 24% increase in service revenue at our domestic genomics testing and bioinformatics business located in Lincoln, Nebraska, with continued strength in the commercial beef and dairy cattle markets and market share gains in the companion animal parentage and wellness testing markets.

Worldwide, genomics revenues rose 17% with additional growth in Brazil, Australia and Canada offset by lower sales in China. Animal care products sold out of our Lexington, Kentucky-based manufacturing and distribution center, such as small animal supplements, wound care and antibiotics, were up 10%; and vet instruments such as disposable syringes and marketing products, rose 9% for the quarter. And these gains were partially offset by lower sales of life science products, the result of lower forensic kit sales to commercial labs, and higher promotional rebates.

Rodenticide sales declined 8% in the quarter, due primarily to lower rodent pressure in certain areas of the country. And domestic cleaner and disinfectant sales were essentially flat and insecticides rose 6% in the quarter.

Gross margins were 47.5% for the quarter compared to 46.9% in last year's first quarter. The improvement here is due to increased margins at our domestic genomics operations in the Animal Safety segment and a shift in product mix in the Food Safety segment toward products, which have higher gross margins and lower sales of lower margin products such as culture media and biosecurity products.

Overall, our operating expenses rose 6% in the quarter compared to last year's first quarter. Sales and marketing expenses increased 2%, in line with revenue growth for the quarter. General and administrative expenses rose 5% for the quarter, due primarily to higher depreciation expenses resulting from our continuing investments in information technology infrastructure, stock-based compensation and increased legal fees.

Research and development expenses increased $869,000 or 31% over the prior year as we continued development spending on a number of new products which are scheduled to be launched in late fiscal 2020 and early fiscal 2021. The $3.8 million we spent this quarter is similar to the $3.6 million we spent in the last quarter of 2019. We expect this run rate to continue throughout fiscal 2020.

Operating income for the first quarter was $16.3 million, compared to $16.5 million in last year's first quarter. When expressed as a percent of revenues, operating income was 16% exactly compared to 16.5% last year with the decline the result of a higher R&D spending level. We recorded $1.5 million in interest income for the quarter compared to $930,000 last year. This reflects our higher cash and marketable securities balances and higher interest rates on those balances.

Foreign currency losses totaling $117,000 in the first quarter compares to $386,000 in losses in the same period last year. Our pre-tax profit was $17.7 million, compared to $17.1 million in last year's first quarter. And our effective tax rate for the first quarter was 17% compared to 11.1% in last year's first quarter. Last year's effective rate was unusually low due to $2.3 million in tax benefits recognized from the exercise of stock option. This year the comparable number was $769,000. As I've mentioned on previous calls, the volume of option exercises can result in large fluctuations in the effective tax rate for the comparative periods.

On the balance sheet, our net receivables balance declined by 4% compared to year-end and our collection period was 64 days for the first quarter. Inventory increased by $1.7 million or 2%. We're focusing significant effort this year on improving our inventory turns and have objectives and programs in place at each operation to make that happen. We generated $23.7 million in cash from operations during the quarter. Invested $4 million of that in property, plant and equipment and additional amounts to license technology.

I'll stop here to say that we realize that we need to accelerate the organic growth performances of our business. There were a number of areas in the business, which performed well in the quarter, which were obscured by one-time factors and other market noise. We continue to be excited about the remainder of the year and appreciate your support.

At this point, I'll turn it back to John for further comments.

John Adent -- President & Chief Executive Officer

Thanks, Steve. Although we didn't reach all the financial goals we had set for ourselves in the quarter, we are able to solidify some partnerships that we believe will help drive our future performance. Earlier this year, FDA Deputy Commissioner, Frank Yiannas spoke about a New Era of smarter food safety. He said that this New Era would be an enhancement of FSMA and focused on utilizing new and emerging technologies to make our food supply safer. The blueprint for the New Era would address several areas, including traceability, digital technologies and evolving food safety platforms. I believe in this vision, and in Neogen we're leading the way in several areas.

First, we signed a partnership with Corvium, the leading producer of food safety and risk management software. The success that we've had in developing and marketing food safety test has led to an almost overwhelming amount of data that our customers must sort through to protect their customers and businesses. This platform will help our food safety diagnostic customers aggregate, analyze and act on that data. The combination of world-class testing products with a world-class food safety and risk management system will allow our customers to reduce their food safety risk.

The new Neogen analytics platform will help our customers make quicker data-driven decisions. For example, let's say a tester receives a positive result using our Listeria Right Now test, what caused that result? Was it a one-time event? The result from a transient problem that can be solved by a single repeated sanitation effort, or is it a systemic problem that the Company must address to -- from an operational changes? The software will help our customers determine the extent of the problem and provide a digital record for the remediation and mitigation efforts.

We'll continue to investigate new and novel block chain, artificial intelligence and machine-learning solutions to enhance our Neogen analytics platform and help our customers identify and eliminate food safety issues. We feel that providing products and services in an integrated and easy-to-use platform will continue to drive Neogen's market-leading status.

Additionally, last week, we announced a collaboration with International Genetic Solutions to make our market-leading Igenity Beef Profile even better. Beef cattle producers use the product to select the best animals for their breeding programs. That selection is now absolutely critical as replacement heifers represent an investment of about $2,000 per head through the cost of development and lost sale opportunity.

As part of this partnership, Neogen will benefit from access to information that will improve the Igenity Beef Profile and IGS will endorse and promote the use of the product and important seal of approval from one of the largest genetic evaluation services in the world. We believe that we've only just begun to realize the tremendous potential that our genomics technology can offer the livestock and companion animal industries, as well as food processors.

We've continued our genomics laboratory expansions in China, Brazil and Canada, and have just broken ground on an expansion in our flagship operation in Lincoln, Nebraska. We're doing all that we can to satisfy the accelerating demand for genomic services. As Steve mentioned, while overall performance for the quarter did not meet our goals, we feel good about where we're going from here. We continue to be well positioned in our growing markets with the right people and products or the organizational strength to reach anywhere in the world we need to exist.

We believe our continued worldwide dedication to food and animal safety will allow us to provide the results that our customers, shareholders and employees have come to rely upon. I'm excited about our future and look forward to stronger performances going forward.

Let me stop at this point and entertain any questions from those of you who have joined the call.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Brian Weinstein from William Blair. Your line is open.

Andrew Brackmann -- William Blair & Company -- Analyst

Hi, guys. Good morning. This is actually Andrew Brackmann out for Brian. Well, maybe just...

John Adent -- President & Chief Executive Officer

Good morning, Andrew.

Andrew Brackmann -- William Blair & Company -- Analyst

Good morning. Maybe we can just first start off on the Food Safety side. It seems like there were several moving pieces there. Maybe -- I appreciate the commentary and one of these -- some of these being sort of one-offs, but what gives you the confidence that there's not really an underlying structural demand issue there?

John Adent -- President & Chief Executive Officer

I think Andrew, it's because we had -- we can quantify exactly what were those issues on a one-off basis. So, we -- it's being talked about in Brazil. It was a change of a customer going to a high throughput solution that we don't offer [Indecipherable] tender to a government agency. And a year ago, we talked about that. I know Steve's got the details of exactly how that walk-up looks. So let him tell you a little bit, Andrew, how that walk-up looks to get to a number where we feel it's more normalized.

Steve Quinlan -- Chief Financial Officer & Vice President

Sure, John. So, Andrew, that government tender was about a $1 million. And if we just stay on the Food Safety side of the business, that would have been about a 2% improvement in results on that side. We talked about the currency being about $1 million on that side, which again, is about 2%.

That forensic business that the customer switched out, that's about $800,000 impact for the quarter, about a 1.5%, 1.6%. And then we had what I would characterize as equipment and distributor issues that were about another $1.4 million [Phonetic], it would have been another 2.5%.

So, when you look at those, that's about a 8% differential from the Food Safety results that we recorded and that gets you to about 6%. And then I would tell you that there were just other results that I would characterize as being somewhat sluggish this quarter, but not systemic and been indicating a problem in the business.

So that's why, I think, John and I are both excited about the future of the business and that we aren't -- I mean, disappointed in the quarter, yes, but not -- but still excited about the prospects going forward.

Andrew Brackmann -- William Blair & Company -- Analyst

Okay, that's very helpful. And I don't want to put words in your mouth, and I know you don't guide on the segment level detail, but the expectation should be that as we move into the second quarter and sort of through the end of the year, that growth rate on the organic and reported basis should improve more to that mid to high single digit.

John Adent -- President & Chief Executive Officer

Yeah, I mean, we -- like I said, I'm looking forward to stronger quarters. I want to get this one behind us and get going.

Andrew Brackmann -- William Blair & Company -- Analyst

Okay. And then just last question for me. I know we've talked in the past a little bit about the M&A strategy. But any update there on the pipeline or what you are thinking about in terms of size of deal or timing? Thanks.

John Adent -- President & Chief Executive Officer

Size of deal, we are looking at a wide range from tuck-ins to a bit more chunky, which -- where we said we wanted to do. From a timing standpoint on the tuck-ins, I would have liked to have those done already this quarter, but it's hard to push some sellers. So those -- we know that those are in the queue and we're working actively on those, and we continue to work the channel. The pipeline looks good. It's just getting some deals closed.

Andrew Brackmann -- William Blair & Company -- Analyst

All right. Thank guys.

John Adent -- President & Chief Executive Officer

Thanks Andrew.

Operator

And our next question comes from Paul Knight with Janney. Your line is open.

Paul Knight -- Janney Montgomery Scott -- Analyst

Hi, John. Could you go over the genomics business a bit? You had mentioned various expansions, if you could recap that and what are customers buying. I know that you do a microarray-based testing, but are you offering database inquiries, etc.? So if you could kind of go over the bricks and mortar. And then secondly, what the product offering encompasses today.

John Adent -- President & Chief Executive Officer

Sure, Paul. So on an expansion standpoint, I mean, I think the biggest one is expanding our facility in Lincoln, Nebraska. We've run out of room there and we've got a building next door that we're building out. So you may increase capacity there. We're moving into a brand new facility in Canada that is already lab equipped. So, when we bought the Canadian business, we knew we're going to have to expand it. So we did that. We've increased in Brazil. We've moved that facility, oh, boy, I think that was probably about two quarters ago. We're really getting that up ramped and rolling and then increased in China. So, on a physical standpoint, we're really increasing the square footage and the amount of tests we can run. And we need to because we've got to keep up with the demand from the customers.

On the product portfolio side, we continue to grow in our Beef Igenity profile product, which allows commercial producers to choose the right animals for their system. I think what's exciting about the announcement with IGS is that that's a pretty progressive group. It's made up of 12 breed associations. They've got over 16 million animal records and they add about 400,000 new animals annually.

So, think about using that data for us to improve the predictiveness and the effectiveness of our products. We're really excited to continue that type of relationship. We're seeing growth and market share on the dairy side and picking the dairy heifers. And then we've seen a nice growth in companion, whether it's both our wellness testing and our parentage testing. So it's been a really nice growth story and it's continued to be a nice growth story, and this quarter was no exception to that.

Paul Knight -- Janney Montgomery Scott -- Analyst

And then lastly, John, what would be your goal on operating margin?

John Adent -- President & Chief Executive Officer

You want me to channel Jim, channel Jim, Paul for that. I think Jim's listening. I know he's smiling right now. I think you got to have a goal of 20% or more. I mean, I think our business can do that. It's something that we continue to strive for. But I think what we really want to focus on is, continuing to incrementally expand operating margin, and not so much say, if I hit 20%, that's the bulk [Phonetic], because it's not the goal. I think it's -- we want to continue to expand operating margins and do it the way that balances our growth. So we don't strive for growth. We don't strive for innovation, but we continue to improve that financial metric for our shareholders.

Paul Knight -- Janney Montgomery Scott -- Analyst

Okay. Thank you.

John Adent -- President & Chief Executive Officer

Thank you.

Operator

And your next question comes from Jason Rodgers with Great Lakes Review.

Jason Rodgers -- Great Lakes Review -- Analyst

Yes, just wanted to follow up on the loss of the Brazil lab customer. I wonder if you could provide any more detail as far as why they changed solutions and is there any other lab customers you have in Brazil at risk there?

John Adent -- President & Chief Executive Officer

So, when that business started, that was really a great opportunistic solution that our team provided to a marketplace. We had a test that really could meet the needs there. But it really wasn't our business, we didn't know all those customers very well. And what happened was that Brazilian hare [Phonetic] market grew so quickly that the customer needed -- and it was the largest in that market -- needed a higher throughput solution, and we just didn't offer it. So, we continue to sell our test kits to other labs within that market that just don't have that same level of throughput. And I'm not as concerned because that equipment is extremely costly from a capital layout -- from a capital standpoint, and only the largest can really afford to do that type of solutions. I'm not as concerned.

I think what -- the risk there going forward is if the new president decides to eliminate that regulation and he ran on that from a campaign promise. No, he hasn't changed anything yet. But that could be something looking forward that if he stops requiring the tests, then high throughput of ours doesn't matter. They are just not going to test for it.

Jason Rodgers -- Great Lakes Review -- Analyst

All right. And then looking at the genomics market, you talked about some good growth in that whole companion animal business. How large is that now as a percent of your total genomics business and how fast do you expect that to grow and how large the market -- how large of a market could that be?

John Adent -- President & Chief Executive Officer

I don't know if we've ever [Indecipherable], I don't know if we've ever split that out. But let me talk, Jason, a little bit about how big it could be. I mean, think about kind of the tremendous growth that -- on the human side you've had on ancestry.com or some of those other parentage types. I mean, their growth has been just phenomenal. And I think that always -- those type of trends always seem to trickle down to the companion segment as pets are part of the family and people want to know the history of where my dog came from and what its traits are, and did it have a champion and its pedigree in the background. So I think those things are very important and it's going to continue to grow.

The other piece we're really excited about is the wellness piece. And -- that we're just getting started with and working on, is looking at can we help pet owners and veterinarians make better decisions around treatments. If we could predict that this -- your puppy perhaps has tendency for hip dysplasia or for some other disease that we can find a market for, that would then help you customize a diet or a training program or an exercise program that's going to help mitigate that to give your pet a much better quality of life. So I think those are big markets and we're just scratching the surface on them.

Jason Rodgers -- Great Lakes Review -- Analyst

Okay. Thanks for the detail there and just one final one. Given all the increases that you've got under way in genomics, I wondered if you have an updated capex estimate for fiscal '20?

Steve Quinlan -- Chief Financial Officer & Vice President

The biggest item for capex in the genomics business is going to be the expansion of the Lincoln facility which I mentioned. That's probably going to ultimately be about a $2.5 million renovation or build-out. And then there'll be some equipment that'll follow behind it. It may move into fiscal 2021, but it'll be about $2.5 million of spending in this year.

Jason Rodgers -- Great Lakes Review -- Analyst

So where would that put capex overall and companywide for fiscal '20?

Steve Quinlan -- Chief Financial Officer & Vice President

Capex, it's going to be -- I'd put it somewhere in the $15 million to $18 million range, depending on timing of spend, somewhere in that.

Jason Rodgers -- Great Lakes Review -- Analyst

Okay. Thank you.

Steve Quinlan -- Chief Financial Officer & Vice President

You're welcome.

John Adent -- President & Chief Executive Officer

Thanks, Jason.

Operator

And the next question comes from Kevin Ellich from Craig-Hallum. Your line is open.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Good morning, guys. Thanks for taking the questions. I guess, let's start off with African swine fever. You guys did call out the 18% decline in revenue in China. Just wondering what the outlook is now, and do you expect this pressure to continue, and I guess, for how long?

John Adent -- President & Chief Executive Officer

Yeah, that's a good question, Kevin. I think the pressure will continue on the genomics side a little longer because they are just unclear how they're going to go forward. And the nice thing about the diversity of our business is the puts and takes, because while we had that decline there, I mean, we had increased sales of cleaners and disinfectants in China for the exact same reason, right. So, it's a negative on one side of the business, it's an opportunity on the other. And I just don't know whether China's got a good handle on how they're going to manage this disease, and not just China, I mean everybody else, be quite honest.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Right. And have you seen the impact of African swine fever spread through some of the other markets? Is that true [Phonetic] John?

John Adent -- President & Chief Executive Officer

Yeah, I mean, we saw -- South Korea just announced last week that they have confirmed cases that came from North Korea, who hasn't announced, but not a shock that North Korea hasn't announced anything. I think now it's in 13 countries and it's been -- and the challenge now is I think -- Philippines is the other one, Kevin. And that one was a little concerning because now it's not just land based. So you can see all go from China through the Korean Peninsula through land, but now this thing, we got through Philippines, they had to go on a boat or a plane. So, it's going to be a little interesting.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Well, hopefully that'll be good for your cleaners and disinfectants business.

John Adent -- President & Chief Executive Officer

That's exactly right.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Right. Right. So, after the -- it's interesting -- under the companion animal genetic testing, really appreciate those comments. I see you guys have your own tests. But are you doing any private label work? I mean, clearly there is a lot of genetic test brands out there now, like with some panel embark, are you doing any private label or have you thought about doing any of that?

John Adent -- President & Chief Executive Officer

We do. I mean, we do help out and do the -- we're the back office for some of the larger ones in the industry.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Okay. That's kind of what I was thinking. And then lastly, you talked about accelerating organic growth. And we appreciate the comments on the Food Safety side. But what other things are you putting in place to drive organic growth? And I guess, over what timeframe do you think it'll take before we see that benefit?

John Adent -- President & Chief Executive Officer

Yeah. Well, we've got new products and technology coming in the second half of the year that we're pretty excited about that is going to help us long term. In the back half of the year, I can't say that I'm counting on it to be a big driver for this fiscal year, we're adding salespeople. We continue to add sales teams in our end markets to continue to try to grow and find that -- find the marketplace. We're constantly evaluating our distributors.

I think what was interesting was, we had some programs that were pretty successful in Animal Safety side that got distributors interested in the US, which helped that growth. I don't think the market got any better, but I think some of the things that we offered had a positive influence on those distributors. But as Steve mentioned, I got a distributor in Europe that we've been working with for a while and we've had declining sales for two to three years and we've got to address things like that.

And so, those are some of the things that we've got to do to continue to drive organic growth, is to continue to put more people in the field to help drive our direct sales, work with our distributor partners to help them reach the end customer and influence the end customer, look for products through their warehouses, so we can drive sales that way also.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Got you. Makes sense. Thanks for all your help. Thanks, John.

John Adent -- President & Chief Executive Officer

Thanks, Kevin.

Steve Quinlan -- Chief Financial Officer & Vice President

Thanks, Kevin.

Operator

[Operator Instructions] The next question comes from Kevin Ellich from Craig-Hallum.

John Adent -- President & Chief Executive Officer

We just did Kevin.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Yeah, I actually queued back up, I don't know if anyone else is in, John, but...

John Adent -- President & Chief Executive Officer

Well, go ahead, Kevin. You are back on. All right.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

So...

John Adent -- President & Chief Executive Officer

[Indecipherable] Kevin.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Thank you. You talked a little bit about the wet summer that we've had in the Midwest. And I think you said you expect sales to improve here in the next couple of quarters with the corn crop coming in. Just wondering how much that affected growth this quarter, if were, if it had any impact?

John Adent -- President & Chief Executive Officer

I mean, there was probably a little bit of timing Kevin, but it really -- I can't say that much. I mean, I know the harvest is delayed, because it was such a wet spring and everything's delayed. But maybe some early crop corn last year would have been in the first quarter and now it's in second. But I don't think it's that big of a -- big of an impact. Most that corn harvest is always in the second quarter anyway.

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

Got it. Excellent. Thank you.

Operator

And the next question comes from David Westenberg from Guggenheim. Your line is open.

David Westenberg -- Guggenheim Securities, LLC -- Analyst

Hey, thank you for taking the question. So you've talked about your long-term growth rate around high-single digits, 8%-ish, with Animal Safety being 6% to 8%, and Food Safety being 8% to 10%. So just wondering, do you still see that as the long-term growth rates of the business and how confident are you that, that you can grow back to that rate? And do you think there might be any market share dynamics over the last few quarters that might have been affecting those growth rates?

John Adent -- President & Chief Executive Officer

So, David, I think there's been some market dynamics, especially in the Animal Safety side and we beat that up pretty good. I mean, that's a cyclical market and we're kind of in a trough on that one. And that's just a -- that's a tougher one to squeeze out those type of rates.

Food Safety, I feel very confident. I mean, there was just a -- there was a report that came out the other day from, I think, it was the Swiss Federal Institute of Technology. And what was interesting about that, they talked about that meat consumption has risen by more than half in Africa and up by two-thirds in Asia and Latin America. So our long-term prospects, whether it's on the farm side helping those producers produce -- clean out the animals or even on the Food Safety side, is going to continue to grow. So I think we've got really good opportunities. And then, when we start getting some acquisitions and layer them on top, then I'm really excited.

David Westenberg -- Guggenheim Securities, LLC -- Analyst

Right. Now, thank you. And then on the acquisition front, so how would you categorize a private equity right now? Do you still feel like the valuations do seem a little bit higher than they are historically, and do you see any pick up in terms of competition for acquisition?

John Adent -- President & Chief Executive Officer

It depends, David, how far your history goes back and looks. I mean, if you want to -- if you go back. This has been a pretty -- there's been a lot of money in the market for the last couple of years. And yeah, if you go back and say, you look over 10 years, then yes, the rates are probably higher than the 10-year average. But over the last couple of years, there's still a lot of money on the sideline trying to get -- put to use.

And so, maybe we've done to get to a story and tell them how great a market this is, because not everybody wants to come in and put. But you know, come on in, I'm ready to go. I mean, [Technical Issue] right. So we really believe in the team, we believe in our products, we believe in the people we have, and we are ready to compete.

David Westenberg -- Guggenheim Securities, LLC -- Analyst

Got it. All right. Just one last question. I know you already kind of got into it with Kevin's question, but just want to get further -- kind of conceptualize what the long-term opportunity around ASF. So can you maybe give maybe some feedback from customers in Asia, or some way for us to think about all the opportunities, because I mean, obviously, I mean, cleaners and disinfectants business picked up. But could this be some sort of 10-year drive of multi-products? I mean, just really it would help us think about the upside of what that could be.

John Adent -- President & Chief Executive Officer

Yeah, I mean if you think conceptually right, and you would say with this type of issue, a strong efficacious product encompassed with a biosecurity program, would be a benefit to Neogen in the long term with this. But you can't have one without the other. You have to have a program in which you are doing things properly to stop the spread of the disease.

So I think long-term CMB absolutely. I also think if you think longer term, on the genomics side, when they have to repopulate all those animals, it's going to be in their best interest to try to pick the best breeding stock to repopulate all those animals, whether it's in China, Romania, or South Korea, or Philippines. And we work with all those companies today.

So I think we have opportunities here, but it's important to take. I mean, you're going to have some negatives, because if they're just depopulating 30%, 40%, you're not going to process those animals. If you're not going to process the animals, you may not use our pathogen testing. So there are upsides to this and there are downsides. But either way, Neogen can help customers find the right solutions.

David Westenberg -- Guggenheim Securities, LLC -- Analyst

Thank you very much.

John Adent -- President & Chief Executive Officer

Thanks, David.

Operator

And this concludes the question-and-answer session. I'll turn the call back over to John Adent for final remarks.

John Adent -- President & Chief Executive Officer

Great Adrienne, and thank you. Thanks to all of you for joining the call today. And if you haven't already, please be sure to return your proxy votes via the mail. And whether you vote via mail or not, you're all welcome to attend our Annual Meeting October 3rd in Lansing. And if you have any questions about that, please contact Rod Poland. So thanks, everybody. We appreciate it.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

John Adent -- President & Chief Executive Officer

Steve Quinlan -- Chief Financial Officer & Vice President

Andrew Brackmann -- William Blair & Company -- Analyst

Paul Knight -- Janney Montgomery Scott -- Analyst

Jason Rodgers -- Great Lakes Review -- Analyst

Kevin Ellich -- Craig-Hallum Capital Group -- Analyst

David Westenberg -- Guggenheim Securities, LLC -- Analyst

More NEOG analysis

All earnings call transcripts

AlphaStreet Logo