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Neogen Corporation (NASDAQ:NEOG)
Q4 2021 Earnings Call
Jul 20, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Neogen Fiscal Year 2021 year-end earnings call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Adent, President and CEO. Please go ahead, sir.

John Adent -- Chief Executive Officer and President

Thank you, Chuck. Good morning, everyone, and welcome to our regular quarterly conference call for investors and analysts. Today, we will be reporting on our fourth quarter and our full 2021 fiscal year, which ended May 31. As usual, some of the statements made here today could be termed as forward-looking statements. These statements are subject to certain risks and uncertainties and our 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 joining us by live telephone conference, I also welcome those of you participating via the internet. Following our prepared comments this morning, we will entertain questions from conference attendees.

I'm joined this morning by our Chief Financial Officer, Steve Quinlan, who will provide detail on our results for the quarter and the year. While we're beginning to see some relief due to the rollout of COVID-19 vaccinations, particularly in the United States, Europe, and Latin America, we recognize that the pandemic is a global issue. And as a global Company, we remain vigilant, continually monitoring the spread of any variance and any lockdowns that go into effect. We eagerly await our new normal whatever that's going to look like and we stand ready for whatever comes our way.

While this year has been challenging, our dedication to serving our global community has not wavered. As was mentioned in the press release this morning, we're pleased to report record top-line growth. All while we took the appropriate steps to protect our people, focused on remaining connected with our customers, and grow our business. We recognize the important role we play in protecting the global food supply and keeping people, animals, and food safe, especially during a global pandemic. Furthermore, as a leader in the food and animal safety markets, we remain focused on continuing to innovate for our customers across our major product categories to ensure food supply networks across the globe remain as safe as possible. And I will further elaborate on some of our breakthrough products in a few minutes.

We finished our fiscal year with a very strong fourth quarter, reporting an increase of 17% over the prior year as we began to see key areas of our business, like our food allergen test kits, rebound from the lows of COVID-19 -- of the COVID-19 pandemic. And what's been a challenging year, I'm extremely proud of our Neogen team members and their results. The new products that we launched in fiscal year '21, helped to lead this growth in all areas of our business. Despite our inability to travel and conduct much business physically, face-to-face, our teams have continued to innovate and connect with our customers, providing new solutions that are making it easier than ever to detect potential hazards in the global food supply. You know, I've mentioned the Soleris NG System on past calls, but I want to do it again. This next-generation spoilage detection system, which we launched in July of 2020, evaluates microbial activity and provides quality diagnostic to customers in the food, beverage, nutraceutical cosmetics, and cannabis industries, helping us to expand on our food-safety mission. In the fourth quarter alone, we saw Soleris equipment sales more than double over last year, bringing the growth to 64% on the year. in addition to Soleris NG, we recently relaunched our ThyroKare canine hypothyroidism supplement and sales have taken on very nicely as we regain share, after leaving in that market in 2016.

Our December acquisition of Megazyme increased sales in our Food Safety segment, especially in the fourth quarter, as we've continued to integrate the Company and their expertise in food quality and nutrition into our existing business. Megazyme's diagnostic assay kits and reagents are used to measure dietary fiber, polysaccharides, and sugars and acids such as lactose. This acquisition has added more products for our portfolio, which in turn has allowed us to offer more solutions to help meet the needs of our customers.

We ramped up our 2021 full fiscal year with revenue growth of 12%, with double-digit increases in both our food and animal safety segments, showcasing the continued strength of our two segments, stretching across dozens of industries across the world. All in all, a very strong performance in an incredibly challenging year.

I'm now going to turn it over to Steve to elaborate a little bit more on the quarter and the year.

Steve Quinlan -- Chief Financial Officer

Well, thanks, John. And good morning to everyone on the call today. Before I start with the numbers, I'd like to echo John's comments and just how proud we are of the quarter we're reporting on today. It was a very difficult year due to the pandemic, but our entire team pulled together and did an outstanding job working through the challenges. While we're seeing some loosening of restrictions, we're not yet through [Technical Issues] these challenges. We still have many individuals working remotely and are experiencing some adverse effects of supply chain and workforce shortages. But as markets are opening up, our sales team is starting to increase their business travel and we're working toward getting back to our normal operating conditions. Earlier today, we issued a press release announcing the results of our fourth quarter and full year, which ended on May 31.

Revenues for the fourth quarter were $127.4 million compared to $109.1 million in the same quarter a year ago. And that's an increase of 17%. For the full year, revenues were $468.5 million, a 12% increase over last year's $418.2 million. Net income for the quarter was $15.8 million or $0.15 a share, compared to $16.3 million a year ago, also $0.15 a share. Full-year net income for fiscal 2021 was $60.9 million or $0.57 a share, compared to $59.5 million or $0.56 a share for fiscal 2020. You will remember, we announced a two-for-one stock split, effective June 4, and these per share amounts have been adjusted to reflect this. After several quarters of negative impact from currency, we have some good news in the fourth quarter as several currencies, and in particular, the pound and peso strengthened against the dollar. As a result, our comparative revenues were $3.3 million higher for the quarter than they would have been in a neutral currency environment. Now, this offset currency headwinds for the first half of the year, resulting in a net negative currency impact of only $85,000 on revenue for the full fiscal year.

In the fourth quarter, we also benefited from our December 30 acquisition of Ireland-based Megazyme and to a lesser extent our July 20 -- our July 2020 acquisition of the StandGuard product line. Excluding these acquisitions, our organic sales grew 14% in the fourth quarter and 9% for the year. Overall, revenues in the Food Safety segment increased 18% in the fourth quarter and 10% for the year. Excluding the Megazyme acquisition and several international acquisitions of distributors in fiscal '20, our same-store sales growth was an impressive 12% in the fourth quarter and 6% for the year. In the first half of the year, the Food Safety segment struggled with some core product lines as many of our customers were disrupted by COVID and were forced into the [Phonetic] shutdowns or reduced capacity at our operations around the globe. We've seen business in many markets pick up in the last several months as restrictions are eliminated, but we still have adverse conditions in several countries in which we have operations, such as India and Brazil.

Highlights in the food safety product line for the full year include a 19% increase in sales of our Soleris product line for general microbial testing such as yeast and mold. This was driven by strong sales of our next-generation instrument -- that Soleris NG that John was talking about, which has exceeded our expectations in fiscal 2021. Additional placements of this instrument also resulted in higher sales of the consumables used for ongoing testing. Sales of our natural toxin test kits increased 6%, while sales of our allergen test kits rose 5%. Our AccuPoint product line, which monitors environmental sanitation and food processing environments, was flat for the year as many customers lowered their purchase volumes earlier in the year because business was down. In the fourth quarter, this line increased 14%. We recently launched a new reader for this product line and are excited about its potential for fiscal '22.

Our Listeria Right Now product continued its steady growth, increasing 21%, while our culture media products grew 1%, as lower ordering from a number of large domestic customers offset some new business to a manufacturer -- a vaccine manufacturer. We continue to face adverse conditions with our drug residue product line as those sales declined 30% in fiscal '21. An inability to make in-person sales calls during COVID has hurt our ability to convert customers after we ended our exclusive distribution agreement with our European distributor. Continuing Internationally, sales were up 11%, despite COVID-related challenges throughout most of the year, in most of the countries we operate in. Sales in the UK increased 10% with some of this growth coming from a stronger pound compared to the dollar. Our increase in pounds was 4%. The growth was led by a 22% increase in sales of cleaners and disinfectants, primarily due to strong sales to China as that country continues to fight the African swine fever outbreak and COVID-19, as well as high sales of hand sanitizers to the UK government in our first quarter. After a difficult year relating -- resulting from COVID-related lockdowns, Food Safety sales are starting to increase, with our One Broth One Plate micro workflow solution to detect Listeria and Salmonella, and increased allergen testing leading the way.

Revenues in our Brazilian Food Safety operations increased 5% in US dollars for the quarter, led by a large increase in forensic test kit revenues, and supply issues from a competitor allowed us to pick up additional business with the customer. Higher sales of aflatoxin test kits for corn, culture media, and genomic services for the bovine market also contributed to their increase, which was 10% for the quarter in Brazilian reais. For the full year, sales in Brazil increased 15% in local currency, but decreased 8% when converted to US dollars as the real devalued significantly against the dollar, especially in the first half of this year. Sales at our Mexican operations increased 2% for the quarter in pesos and this converted to a 17% increase in US dollars due to that strengthening peso. Broad-based increases in our diagnostic test kits were partially offset by lower sales of gloves and cleaners, and disinfectants which were abnormally strong in the fourth quarter of last year, as those products were in high demand early in the pandemic. Our China operation had a great year, with revenues more than doubling in US dollars for both the fourth quarter and full-year periods, from continued sales increases of cleaners and disinfectants to help in fighting against outbreaks of African swine fever and COVID-19 in that country.

Our Genomics business in China also had higher sales to the bovine and swine markets. While the pork industry is still struggling from the African swine fever outbreak, we've seen increased testing as producers have rebuilt their animal stocks. Revenues for the Animal Safety segment rose 16% for the quarter and 14% for the full year. So, this is especially impressive considering last year's fourth-quarter results included a $4.5 million increase in sales of sanitizers, disinfectant products, and personal protective equipment such as gloves as demand for those products exploded early in the pandemic. As most of you know from personal experience, supply caught up to demand last summer and those opportunistic sales fell off. Additionally, our pre-COVID protective wear business was down this year due to backorders on these distributed [Phonetic] products.

The increase in Animal Safety revenues for the year were broad-based, with animal care products such as vitamin injectables, small animal supplements, and antibiotics up 31%, driven by an increase in spending on companion animals, especially dogs and cats during the pandemic. Our thyroid replacement product, ThyroKare, which we just introduced late in the year, produced strong sales in its first quarter and much excitement, with high expectations for fiscal '22. Veterinary instruments such as needles and syringes increased 16%, where [Phonetic] rodenticides increased 42% due to significant rodent pressure in the US throughout the year. Our Insecticide line increased 15%, with notable benefit from our acquisition of the StandGuard product line, last July. Partially offsetting this growth was a $2.5 million decline in sales of dairy supplies due to the June 2020 termination of an agreement in which we distributed these products for a large manufacturer of dairy equipment. Cleaner and disinfectant sales sold through the segment were also down 15% from lower sales of water treatment products in the US. And opportunistic sales of sanitizing products in the fourth quarter of the prior year fell off after the first quarter of fiscal '21. Revenues at our Lincoln, Nebraska Genomics lab increased 17% in the fourth quarter as companion animal sales continue to grow, with pet adoptions increasing significantly during the past year as a result of COVID, and our service was offered in more retail operations.

We also benefited from a 15% increase in Bovine sales from higher sales to beef associations and dairy AI companies. For the full year, revenues in Lincoln increased 10% for the reasons just listed, with additional increases in the aquaculture market earlier in the year, driven by a new partnership with a large customer and a new test for shrimp. Our business in Australia rose 71% for the quarter and 78% for the year. Now, a portion of that full-year growth is from our acquisition of a food safety distributor at the end of February 2020, which added to our product portfolio in that country. But if we exclude those new sales, our organic growth for fiscal '21 was still an impressive 59%. Our sales team exceeded expectations with the Food Safety products and our Genomics lab continued to post some impressive gains. Sales of companion animal tests more than doubled as Australians also flocked to pet ownership during the pandemic, and we recorded a 39% increase in revenues to the beef market. On a worldwide basis. Genomics revenues increased 21% in the fourth quarter and were up 13% for the full year. Gross margins were 45.3% for the quarter compared to 47.4% last year as we recorded large increases in supply chain and personnel-related costs. I think it's important to note that the 47.4% gross margin in the prior-year fourth quarter was driven higher by the $4.5 million of opportunistic sales of hand sanitizers in protective wear such as gloves in that period, as the demand for those products in the early stages of the COVID pandemic far outstripped supply.

The decrease in our gross margin in the current year quarter is due to a 210 basis point decline in the Food Safety segment, in part caused by higher sales of lower-margin products such as cleaners and disinfectants in China. We also experienced significantly higher costs for freight and personnel costs due to both increased volume and rate increases, resulting from labor shortages. International freighting cost rose precipitously across the business as port delays and supply constraints drove fee rates higher, while air freight rates also rose. Again, the result of lower supply due to fewer commercial airliners flying during the pandemic. These conditions do persist and we are taking steps to address them, including consolidation of orders, purchasing larger orders less frequently, changing modes, and potentially passing on increases. We had an increase in the scrap in our Food Safety operations in the fourth quarter. Higher outside contracted services costs related to our newly launched instruments and health insurance expenses driven by elective procedures postponed during the initial phase of the pandemic also increased for both the quarter and the year. For the full year, gross margins were 45.9% from 46.9% last year.

Overall, operating expenses were up 18% for the fourth quarter and 9% for the full year. This year's fourth quarter is a difficult comparison since we had no business-related travel in the prior year and also took proactive measures at that time, such as senior management salary reductions, furloughs, or reduced hours for some staff and a spending freeze to protect the business due to the uncertainty of the COVID impact. These actions eliminated approximately $2 million of expense in the prior-year fourth quarter. Now, we're -- while we're still not at pre-COVID levels of travel, our sales teams in certain areas of the world have started to have face-to-face interaction with customers again in the past few months. As a result, sales and marketing expenses increased 25% in the fourth quarter, but only 5% for the full year. Increases in salaries and commissions and shipping expense, both in line with revenue growth, were offset by a $3 million decrease in spending on travel and meals for the full year. General and administrative expenses rose 8% for the quarter and 15% for the full year. Earlier in fiscal 2021, we spent $3.1 million on consulting, legal, and other professional fees related to acquisition activity for targeted business which we ultimately were not successful in acquiring. Excluding these costs, the increase in G&A for fiscal '21 was 8%. Increases in headcount, including a number of senior management positions where we added a General Counsel and a Chief Commercial Officer, incremental amortization expenses which are non-cash resulting from our recent acquisitions, and higher levels of IT investment also contributed to the increase.

The Megazyme acquisition added almost $1 million of cost including amortization to this category in the last five months of fiscal '21. Research and development expenses were $4.1 million for the quarter, that was an increase of 18% for the prior year's quarter, fourth quarter. For the full year, R&D expense increased 10% to $16.2 million. The acquisition of Megazyme which has a small R&D team contributed about $500,000 to the fiscal '21 increase. As a percent of sales, R&D expense was 3.5% in both the current and prior years. Other increases in this category included spending with -- outside partners to develop the new readers, which we launched in fiscal '21 and higher spend on salaries, contracted services, and product approvals. Operating income for the fourth quarter at $20.3 million was up 2% over the prior-year quarter due to the previously discussed reduction in gross margin percentage and increase in operating expenses.

For the full year, our operating income was $74.2 million or 15.8% of sales compared to $67.5 million or 16.1% of sales in the prior year. Our 2021 operating income represented a 10% increase over fiscal '20. Excluding our $3.1 million spend on the acquisition opportunities. operating income would have been 16.5% of our sales and would have been a 14% increase over 2020. While John and I know that we have plenty of room for improvement in this area, we are very proud of our 2021 operating performance, particularly given the pandemic and considering the supply chain and labor challenges we've experienced in the past year. Other income for the year was $1.1 million compared to $4.8 million in the prior year. This significant reduction is due to a $4.4 million drop in interest income despite having higher cash balances throughout the year, resulting from a precipitous drop in yields on our marketable securities portfolio due to US Federal Reserve efforts to stimulate the economy during the pandemic.

Our effective tax rate for the fourth quarter was 21.8%. This compares to 22.8% recorded in last year's fourth quarter. And for the full year, the effective rate increased from 17.7% in fiscal '20 to 19.1% this year, despite a higher tax benefit from the exercise of stock options in the current year. The increase in effective rate for the year was driven by international operations as we had higher profitability in some countries with higher tax rates. And we also paid more tax in the US under the newer rules that tax profitability at our international operations. We continue to produce strong cash flow, generating $81 million from operations for the full year versus $86 million in the prior fiscal year. And invested about $27 million in property and equipment and $52 million in acquisitions during the year. Our inventory balances increased 6% in fiscal 2021 or $5.6 million. Excluding inventory acquired from the Megazyme acquisition, our inventory balances were flat compared to the prior year-end.

As we continue to weather supply chain issues and product delivery challenges resulting from both the pandemic and the Brexit transition in January, we've been forced to increase inventory levels in some areas in order to ensure product is available for our end customers. Our operations team have [Phonetic] done well to balance that need with a continued focus on keeping our overall inventory levels down. Accounts receivable balance rose by 8% over levels at last year-end, and the increase is primarily due to higher sales in the fourth quarter of this year compared to the same period last year. Our days sales outstanding improved to 66 days at May 31, 2021, compared to 68 days a year ago. And our collections team has focused our efforts in the past year due to the economic uncertainty of the pandemic, and I'm pleased to report that we've not seen an appreciable interest in bad debt write-offs or bankruptcies.

This was an extraordinary year we've just gone through. And I believe the performance of the team was outstanding as we fought our way through all the obstacles put in front of us from COVID lockdowns and quarantines through supply chain issues, labor shortages, and Brexit. I could not be prouder of our more than 1,800 employees worldwide and how they've handled the year. In fiscal '21, during very difficult conditions, we continue to invest in future growth, launching a number of new products, spending on new development, opportunities, and looking at potential acquisitions. So, this will continue as we build the product portfolio and infrastructure to allow us to accelerate our growth.

Going into fiscal '22, as our markets open up across the world, our travel and selling expenses will increase disproportionately, but we believe the magnitude of our projected revenue growth will be sufficient to cover that growth. As John has indicated, there is much to look forward to in fiscal '22. We have tremendous momentum going into the new year and are optimistic and excited for the year ahead. John?

John Adent -- Chief Executive Officer and President

Thanks, Steve. You know, Steve's right. There is a lot of different variables affecting our numbers for this quarter and the year. And we recognize that this has been an unusual year and we're actively managing the effects of the pandemic and what those effects have been on Neogen. Like so many others around the world, Neogen has been dealing with supply chain issues, due to the pandemic. Steve mentioned this, but we've seen our cost, both inbound and outbound freight, increase tremendously. In some cases, tripling, and we've been dealing with the impacts on our margin and earnings all year. Steve talked about the actions that we're taking to help curve those costs going forward. So we feel pretty confident we're going to get those back under control. Steve went through this in a lot of detail, but I think it's worth talking about some more. Comparing our financial performance to last year's fourth quarter is difficult. In the last year, at this time, we were just -- the world was just entering a lockdown and we were unsure as to how the global pandemic would impact our business. So, as Steve talked about, we implemented a number of cost-saving, really aggressive cost-saving measures. We reduced or eliminated the pay of our senior management, we furloughed or reduced the hours of approximately 5% of our US workforce. We cut discretionary spending when we halted all business travel. And that saved us nearly $2 million in the quarter of last year. We then quickly found opportunities to support customers around the world in protecting their facilities and staff with opportunistic sales of gloves, sanitizers, and disinfectants of over $4.5 million.

Now, that being said, we feel well prepared to handle these variables and are extremely optimistic about the business as we move into our new year. This July, we're going to be fully integrating Megazyme under the US [Phonetic] and sales and marketing teams. We've already seen a tremendous amount of excitement from our customers regarding the products offered by Megazyme and we look forward to carrying these -- that excitement into the marketplace and offering these new solutions. Our Animal Safety segment had a strong recovery year on the strength of animal care products, veterinary instruments, and biosecurity products. We received EPA approval for the US distribution of Neogen Viroxide Super and launched it domestically at the World Pork Expo in June.

Demand continues to be strong for rodent control products across the US as we move into fiscal '22 and I look forward to seeing continued growth of this segment into the next fiscal year. We're seeing our Forensic Toxicology sampling -- samples beginning to increase as we are expecting the industry to bounce back after the COVID-19 shutdowns of workplaces and racetracks. Our worldwide Genomics offering continues to grow, reaching new markets and new customers. We're really excited about the growth we've seen in the Aquaculture sector. On June 24, we announced the expansion of our partnership with the Center for Aquaculture Technologies, a leader in the field of genetic improvement for aquatic species, which continues to open doors for us to work with aquatic breeders to help make more informed breeding decisions and ensure sustainable farming.

We've also seen our companion animal genomics services continue to be strong. Our canine parentage test remains the most common test in [Technical Issues] the United States and used by the American Kennel Club. And our sales of that product, as Steve mentioned, more than doubled in Australia. We also see tremendous potential in the new Igenity Canine Wellness tests, which we launched in December of 2020. This test gives veterinarians the opportunity to screen for predisposed risk factors so they can make informed recommendations on diet and exercise as well as screen for possible health concerns.

In May, we launched our new AccuPoint NG ATP Sanitation Monitoring System, which has been redesigned to be more user-friendly or offering the fastest most precise, and easy to monitor test of data. We feel confident that this new system will continue to gain market acceptance within the food, beverage and healthcare industries in fiscal '22. This last year, we began offering our new Neogen Analytics Food Safety risk management software as a service. The service delivers the most comprehensive environmental monitoring program automation solutions for food companies and it's compatible with innovation -- innovative technologies like our new AccuPoint NG and answer [Phonetic] system, where the users can [Phonetic] implement systems and increase the visibility of food testing results, reducing risk and elevating food safety standards. In Q4, we quadrupled the number of sites using Neogen Analytics and we have a strong customer demand and we'll continue new placements throughout fiscal year '22.

We also recently received AOAC approval for our Soleris direct yeast and mold test for our use in cannabis, allowing us to provide a valuable service to the growing cannabis industry, offering safe and secure options from potentially harmful microorganisms. Yeah, I agree with Steve. I was very proud of our Neogen team members for how they were able to tackle a very challenging year head-on, and doing it by leading through new products and acquisitions, continuing to grow our market share, and giving our customer solutions to make their jobs easier and the global food supply safer. Our entire team has done a great job of adapting to the changing business landscape and working hard in order to give us this positive momentum going into the next fiscal year. We have several new product and service offerings preparing to launch that will help our customers protect the people and animals they care about. I am really excited about our continued growth and expect a strong fiscal '22 year.

I'll now open it up for any questions that you may have.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions]

And the first question will come from David Westenberg with Guggenheim Securities. Please go ahead.

David Westenberg -- Guggenheim Securities -- Analyst

Hi. Thank you for taking the question and congrats on a great year. And appreciate all the color in terms of the margin, that was a lot of very good commentary and helpful. I mean, I'm happy to hear everyone gets their -- got there their salaries back. So, can you quantify -- [Speech Overlap] Can you quantify some of the shipping costs that might have occurred in the quarter and when they're expecting to roll off. And then, just kind of on a ballpark, on a go-forward gross margins, maybe for this year and the year and the year next, because there's been obviously a lot of funkiness in this last year, whether it be like the shipping cost and then I guess the prior year, you know you had some opportunistic sales. Traditionally, I think at Neogen, is like this 47-ish gross margin Company. Is that kind of the -- still the way to think about it?

John Adent -- Chief Executive Officer and President

[Speech Overlap] Yeah, Dave, I'll let Steve Quinlan direct while I'm [Indecipherable] That's all right. I'll let Dave -- I'll let Steve comment on the shipping and then I'll follow up with the rest.

Steve Quinlan -- Chief Financial Officer

Yeah, David, I would say that in the fourth quarter, the incremental freight impact was about $700,000, and thus [Phonetic], it was more than the volume increase. And then, going to your question about the -- what we see as our margin profile going forward, I think you're probably on, that 47% is -- it is probably about right. I think that's an achievable target for '22, and obviously, as you know, a lot of it depends on product mix, and just how that rolls out. And going -- you also asked about what we see in terms of freight for next year, all the reports that we read and people we talk to are that the freight supply demand and balances are going to continue into '22.

So John, I don't -- do you have more to add to that?

John Adent -- Chief Executive Officer and President

Yeah. And I think, Steve mentioned some of the things we're doing about it, David, right is we're going to make sure that we're doing full truckloads, full container-loads, planning, looking at ways that we can be more efficient. We're looking also at -- these costs are coming through, so our customers know these costs are coming through, so they're expecting price increases and we don't want to disappoint them. So, we'll see some of that happen within the year, all right. And so, you're going to see an opportunity for us to improve margins that way. And I agree with Steve, I think that baseline that you're looking at is not unrealistic. And we know that there is upside opportunity there.

David Westenberg -- Guggenheim Securities -- Analyst

Perfect. And then just a quick -- one quick one on the JBS plant shut down in -- due to the cyberattack in Brazil. Did that have any impact on you? I realize that you have a lot of customers. And maybe one customer doesn't do anything, but just wondering if it's a -- might have done anything?

John Adent -- Chief Executive Officer and President

It was nothing material for us. I mean it -- it's something to watch across all others. I mean, the thing I'm really watching more, David, is the two confirmed cases of African swine fever in a commercial herd in Germany that came out last week. I think that could be a much bigger impact. So, I think, we continue to look for what's going on around the world and find ways to, as Steve mentioned, we did the opportunistic sales last year, and we'll find a way to fill that gap with new opportunities this year because that's what we do.

David Westenberg -- Guggenheim Securities -- Analyst

Got it. And I'll just ask one more before hopping back in queue. So, can you talk about acquisition priorities? If you have them in terms of animal versus food safety? If you're looking at more value or growth, or international or domestic? And I'm guessing the answer is everything, but if you maybe could correct quarter a little bit to give us kind of a framework on how you might be looking at it and go forward? That would be great. And I'll hop back in queue after that.

John Adent -- Chief Executive Officer and President

Yeah, no. We've got -- we've got a very, I think, a very good plan on the way that we evaluate our acquisitions. I mean we've identified the markets we want to be in and any ancillary markets that we feel are important. And Megazyme's a great example of that. I mean, you wouldn't think about Megazyme, does it fit what we consider true food safety, it's more around food analytics. And -- but it really is a [Phonetic] excellent fit for our business because it's the same customer type and allows us to increase our products and pipeline to that same customer. And I'd like to think about it is, it gives us the other side of the consumer packaged box. On one side, we're talking about, it's allergen-free, it's nut-free, it's gluten-free. And on the other side, we're talking about how much dietary fiber it has, how many polysaccharides, what -- what are those other -- one of those other measurements that are important for consumers. So, it's really a nice expansion for our business. So, we've done a really nice job of looking at the markets we want to be in, and then the regions we want to be in because I think we're underrepresented in some regions. We have a lot of opportunity worldwide to continue to grow and I think, Australia is a great example.

You look at what we did four years ago in Australia when we bought the Genomics business there and then we added, we brought in our Animal Safety products, and we added the food safety distributor and, man, look at that business. It's just growing like crazy and they're doing a great job. So we see that model, we like that model. I think that when I look at it in -- as a team what we've talked about is our priorities really are around growth in our bigger growth markets, our Food Safety and Genomics. And I think those are two key areas that when we say if we had our preference and we had three equally accretive businesses, we're going to look at Food Safety and Genomics, first, and then Animal Safety, second. Within the Animal Safety, I want to increase our exposure in the companion because that's faster-growing in production. Now, they're all great businesses as we've shown this year, right. All the businesses grew double-digit, so they're all great businesses. So it's kind of like picking your favorite child. You don't ever talk about it in public, but you have to do it sometimes behind closed doors. So that's kind of what we look at is, we love all the businesses we're in, but that's where I would see our focus.

David Westenberg -- Guggenheim Securities -- Analyst

Thank you.

Operator

The next question will come from John Kreger with William Blair. Please go ahead.

John Kreger -- William Blair -- Analyst

Great, thanks. Can you maybe -- I know you guys don't give official guidance, but could you maybe just sort of step back and talk a little bit more about key priorities and goals for fiscal '22 since that's just getting started? And also, what you think the key headwinds are? You talked a lot about supply chain, for example. Do we expect those headwinds to actually get worse or just a question of when they might start to ease a bit? Thanks.

John Adent -- Chief Executive Officer and President

Sure. Thanks, John. So, I think for priorities, it's continuing the momentum we have, right. And even though we were in a very difficult environment last year, if you think about it, we launched very significant products and platforms with our AccuPoint NG and our Soleris NG in a COVID environment. We had a lot of discussion about, do we do that, because we have to meet customers face-to-face to explain the benefits of this. And the team did it in a very challenging environment and did a great job and we had great acceptance. At the same time, we continued to invest in new products. So we've got new stuff coming. That is a priority. So, it's really driving -- continue to drive market share gains and adoption of the things that we launched this year and the new products that we have coming. And so, we're really excited about what's coming down the pipeline. And that's going to be our focus to make sure that we continue to grow.

We've done a nice job. I think if you look at some of -- where some of our competitors have reported for the last quarter, our growth was significantly higher. So that tells me we're taking market share on the Food Safety side and the Animal Safety side, which is where we want to be. We like being in growing markets, but we also want to continue to grow faster than the markets. I think the headwinds are going to be -- last year headwinds were on customer shut down and how are you going to sell. I think headwinds this year are going to be on the cost side, like Steve talked about the supply chain. Then Steve talked about another one that's going to be a challenge, which is headcount. I mean it is -- it is challenging now to find hourly workers for the plants and the jobs that we have. And I think everybody knows the reasons why that is and you know we ended up with many [Phonetics] discussions about that, but it's just been a challenge. So, we've had to be very aggressive, we've had to be very creative. It hasn't caused any -- and we've done a great job. Our operations team has done a fantastic job. We've had no backorders or shortages because of that. But it is something that we're battling every single day and trying to find employees and keep jobs filled. So, those would be the two major headwinds and also our objectives.

John Kreger -- William Blair -- Analyst

Great, thank you. That's helpful. Steve quantified the freight hit in the fourth quarter. I think you said $700,000. Curious, do you think you're losing out on any sales due to stockouts and delays as well?

John Adent -- Chief Executive Officer and President

I don't -- I don't think so. I mean, we watch that really closely, John. I think -- I think what will happen is, we're going to end up on some of our lower-margin products that are freight intensive. We're going to raise the price and either, we're going to -- we're going to make money at it or we're not going to sell it. That's how that's going to work.

John Kreger -- William Blair -- Analyst

Makes sense. Okay. And then one last one. A year ago, John, you talked a lot about the pressure on the institutional side of the Food Service business really kind of hurting Food Safety. Where do you think that is now? Is that sort of back to normal or do we still have an opportunity to see a ramp in demand in the fall as kids go back to school and maybe confidence [Phonetic] [Speech Overlap]

John Adent -- Chief Executive Officer and President

Yes, you're -- I think it's come back really nicely. But I think there is more upside there. And again, it's -- that comment is specifically around North America, around the US. When we look at kind of where we are within this pandemic across our businesses, we're in a lot of different stages in a lot of different countries. So, I think we're just starting the opportunity of opening up and seeing some of that business come back. And we see that with our internet sales are up, our e-commerce business is doing really well, and that's kind of what shows me the leading indicator of -- those smaller customers are coming back. They're starting to buy again and you saw with our allergen test kits, that was a nice bump for the quarter.

John Kreger -- William Blair -- Analyst

Great, thank you.

John Adent -- Chief Executive Officer and President

Thanks, Jim [Phonetic].

Operator

The next question will come from Mark Connelly with Stephens. Please go ahead.

Mark Connelly -- Stephens -- Analyst

Thanks. John, I was hoping that you could talk a little bit more about the growth drivers in the animal genetics business outside of companion animals, curious where in the year and couple of years ahead think -- you think the growth is, really is going to be there? How important issues like ASF and plant-based meat are versus productivity and animal health?

John Adent -- Chief Executive Officer and President

Yeah, Mark. I think that when you look at the growth drivers in production animal, a couple of things that stand out. One is the adoption, all right. We still have a tremendous opportunity to increase our customer base with adoption in beef and dairy. And we've talked about this in the past, right, about how we do very, very well with feedstock producers who understand the value and the traits they are looking for. But as we start to go further down the food pyramid and we start getting into more commercial growers, kind of what we're doing around the cow-calf producer, the dairy producer, and then even going deeper into the feedlots, that is a big, big opportunity for us. And we're just now, just really scratching the surface on that because it's more of a blend of phenotypical and genotypical data to make sure that you can take the genotypical traits and use -- make decisions around phenotypical, around feeding an environment to produce the best outcome. So, those are the things that really get us excited about production agriculture within the segments we're already in.

Secondarily, like we talked about with the Aquaculture business, that business is up very nicely and we see a tremendous amount of opportunity with our new shrimp test, our whiteleg shrimp test, which we think is going to be very, very big. That's going to help us grow in regions of the world where maybe we're underrepresented. I mean if you think about Southeast Asia, that's a market that we need to do. We have opportunities for growth then and we think this could help be the platform for us to really drive the Neogen story into some of those markets. So, we think there is a tremendous amount of upside. And I also think companions are too. We continue to see, that is a growing market and we've got opportunities around the Genomics business. And it's something that we're focused on and things that we want to continue to invest in.

Mark Connelly -- Stephens -- Analyst

You mentioned Nebraska lab, do you get to a point at a facility like that where you have capacity constraints or reinvestment needs that are significant?

John Adent -- Chief Executive Officer and President

Yeah. We just expanded that facility. We spent quite a bit of money over the last couple of years, increasing the footprint. I think we -- we almost added 50%, doubled that facility. We doubled that facility in size over the last two years. So that's the thing, Mark, that's challenging with Neogen is you have to stay ahead of your growth curve. So, we have to keep building and investing to make sure that we have the facilities to continue to grow and we've done a really nice job of doing that so far. But yeah, we always look at that. I mean, I don't think it's so much from a -- I don't think it's as much as a footprint or equipment issue as it is labor. So we're looking at, what are all the things we can do. So, you know we have, with our growth, we have now Genomics labs in China, Scotland, Australia, Brazil, Canada. And what we do is, we say, OK, where can we -- or before a lot of that stuff was flowing into Lincoln because we didn't have opportunities, well, now we can offload that under those labs that are more local, which increases the capacity of Lincoln, which allows us to grow more internationally. And we see the exact same thing. We just did a recent promotion of a team member in Brazil, where she is running our Genomics business in Brazil. Now, she is taking over all of LatAm, which means she is going to be coordinating our efforts in Chile, Uruguay, and Argentina, and Mexico, which is going to allow us to leverage that lab better in Brazil. So, those are the things we're doing to make sure we stay ahead of our growth curve.

Mark Connelly -- Stephens -- Analyst

Super. Just one question on -- one of the big protein producers is having a significant Listeria problem right now. I wonder how that affects your marketing program. Do you tend to see a surge in interest after stuff like that? I mean, obviously, you've got a lot of functionality and other stuff that's more important to longer-term, but I'm just curious how it affects the short-term?

John Adent -- Chief Executive Officer and President

We do. And well, Listeria is a key base [Phonetic] as, I mean, any pathogen, Mark, that's going to kill people, we want to make sure we can protect the food supply on. So, we do see that because all of a sudden, you know, sometimes, everything is good until it's not, all right. People will go along, and like, oh, it's been good, has been giving an issue, competitor have an issue [Phonetic], and everybody kind of like is, oh, we need to -- let's do a couple of more audits and let's talk to Neogen about their analytics platform, so we can put that end so we can get real-time data on an hourly basis to make sure that we are meeting the needs of the government and our customers, and then putting the safest food out there we can.

Mark Connelly -- Stephens -- Analyst

Just one last question. Are there any parts of this inflation that you're fairly confident are permanent as opposed to the somewhat temporary stuff, like maybe freight?

John Adent -- Chief Executive Officer and President

I don't know. I think back when fuel prices were hiked. What was that, seven years, eight years ago, and all those carriers put in a fuel surcharge, and then fuel prices dropped by 50%, and gosh, for some reason, there was a fuel surcharge still in there. So, I don't know. I'm skeptical, right, around their ability to lower prices. So, what we need to be is we need to increase our efficiency. And that's what we look to do is one of the ways we're going to increase efficiency to make sure that in a rising cost environment, we can leverage our size and scale to continue to be more efficient than everybody else.

Mark Connelly -- Stephens -- Analyst

Super helpful. Thank you.

John Adent -- Chief Executive Officer and President

You bet. Thanks, Mark.

Operator

[Operator Instructions] Our next question will come from David Westenberg with Guggenheim Securities. Please go ahead, sir.

David Westenberg -- Guggenheim Securities -- Analyst

Hi. Thank you for taking the follow-up. I just want to dive in. You had a lot of great commentary in terms of where kind of the cost inflation is, you mentioned labor as a component. Do you feel comfortable over maybe the next couple of years to add pricing in excess of maybe labor inflation, or if you think maybe relative to competitors, how do you feel with where your labor inflation is? Are you kind of probably just kind of equal the industry? I traditionally think of Neogen as being a very lean, strong operating Company. So, I'm wondering if you would have any differences relative to your competitors in terms of the labor cost component?

John Adent -- Chief Executive Officer and President

I think -- all right, we are lean. I think we do a really good job of controlling our operational expenses. As Steve talked about, we did investment spend in our leadership this year, which I think is already paying great dividends, right. So, when we added a Chief Commercial Officer, we added Doug Jones, we added Amy Rocklin as our General Counsel, and both of them are [Phonetic] outstanding contributors. So, we see that as an investment spend for growth because they're going to help us drive growth forward.

I think we continue to -- I don't think we're out of the market the way that our costs are. And I do think that pricing is a function of a lot of things. I mean, we're bringing new technology that's very valuable and that other people don't have that allows us to show a lot of value to the customer, which in turn, allows us to have a lot of value in pricing when you have more commodity-type products, which some -- we have. We have some steel-type products in our instrument-type business on the Animal Safety side. It's a lot harder to do premium pricing on those. But in our core businesses, we are the market leaders. We are the technology leaders. We feel that we differentiate quite well against everybody else and we're leading the pack, which allows us to build a lot of value for our customers and take a little bit of that value for ourselves.

David Westenberg -- Guggenheim Securities -- Analyst

Great. And then, maybe for the last -- my last question where I hop off would be on the five-year outlook for Soleris in terms of growth rate, what you see? It sounds like a pretty promising new product. And just as -- it sounds like it would be margin accretive, particularly in its consumables. But I just want to confirm that that would be a margin accretive growth area. Thank you.

John Adent -- Chief Executive Officer and President

Yeah, it's a margin accretive growth area, and we're pretty excited about that technology. And even, the way we're growing into what we would consider not food because cosmetics is basically not food, but it is safety. And so, we've got other markets that we're growing with that product line that we're pretty excited about. So we're going to keep pushing that.

Thanks and we're ready, Chuck. Is that it?

Operator

Yes, sir. This will conclude our question and answer session. I would like to turn the conference back over to Mr. John Adent for any closing remarks. Please go ahead.

John Adent -- Chief Executive Officer and President

Yeah. Thank you, Chuck. I think, as you saw from our press release, and with all of those Steve's nice [Phonetic] comments, we're excited about the year in front of us. Once again, Neogen's diversity, in our portfolio, in our markets, has really shown the strength of the Company going into this post-pandemic marketplace. So we're really excited about where we're going to be for the future. I appreciate all of you being on the call today and supporting us. And I hope you have a great rest of the day and we'll talk to you in September.

Operator

[Operator Closing Remarks]

Duration: 31 minutes

Call participants:

John Adent -- Chief Executive Officer and President

Steve Quinlan -- Chief Financial Officer

David Westenberg -- Guggenheim Securities -- Analyst

John Kreger -- William Blair -- Analyst

Mark Connelly -- Stephens -- Analyst

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