Good day, and welcome to the Neogen Second Quarter FY 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I'd now like to turn the conference over to John Adent.

Please go ahead..

Thank you, Grant. Good morning, and welcome to our regular quarterly conference call for investors and analysts. Today, we will be reporting on the second quarter of our 2021 fiscal year which ended on November 30. 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 joining us by live 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've joined this conference.

I'm joined this morning by our Chief Financial Officer, Steve Quinlan, who will provide detail on our results for the quarter. As I said in this morning's press release, we're pleased to report growth across our businesses during the second quarter, even as we continue to fight global market disruptions caused by the resurgent COVID-19 pandemic.

Our food safety teams worked extremely hard in very challenging environments. The food industry is still struggling, especially in the restaurant foodservice sectors as lockdowns and social distancing restrictions are still in place. Our diversification continues to be our strength.

Our deep knowledge and broad product offerings allow us to grow when we face downturns in specific markets and countries.

Steve will run down the numbers, but we overcame the food safety issues with solid performances from our animal safety division, including our worldwide genomics group and significant sales across our entire product portfolio and global markets that were not as affected from the pandemic, including China and Australia.

China is still fighting the devastating effects of the African swine fever outbreak has had on its pork industry. It is estimated that since the start of the outbreak in August of 2018, the China lost 60% of its pigs to the disease, which amounts to tens of millions of animals.

Even after the outbreak, China is still by far the largest pork producer with an estimated 310 million pigs of the 678 million worldwide in 2020. China is still having outbreaks and losing pigs to this deadly disease even today.

Our Neogen China team has worked tirelessly to improve the biosecurity training and infrastructure in China to help control the spread of the disease. This has resulted in significant new sales of disinfectants into China.

And in the second quarter, we recorded a sales increase of more than 500% on porcine genomic tests as customers begin the long process of repopulating their herds. As we end a tough calendar year, Neogen has withstood because of our 18,000 global employees have stepped up to the unprecedented global challenge.

We quickly established and continue to take extraordinary measures to protect our business and employees, have watched our teams around the world work to ensure safe and plentiful food supply during the pandemic. They deserve all the credit for our success and I couldn't be more proud of them.

I'm now going to turn it over to Steve to run down the numbers for you.

Steve?.

Well, thanks, John, and welcome to everyone listening this morning. Earlier today, we issued a press release announcing the results for our second quarter and year-to-date periods ending November 30. Revenues for the quarter were $115 million, up 7% compared to $107.8 million in the [Technical Difficulty] share a year ago.

The results in the second quarter of the year reflect almost $1 million in expenditures on acquisition activities, which do not ultimately come to fruition and that was about a $0.02 impact to our net earnings. For the year-to-date, revenues were $224.3 million, up 7% over the $209.2 million reported last year.

Net income for the first six months of fiscal 2021 was $31.7 million, or $0.60 a share compared to $30.9 million, or $0.59 a share a year ag. Over the next few minutes, I'll take you through some of the highlights of our quarter. We've talked about the impact on our business from currency translations in the past few calls.

And during the second quarter, we continued to be impacted by these fluctuations as comparative revenues would have been $1.2 million higher for the quarter in a neutral currency environment, primarily due to continued weakness in the Brazilian real and the Mexican peso relative to the U.S. dollar.

However, the pound and euro have both increased relative to the dollar due to perceived prospects for an orderly Brexit. And on a further positive note, all of the currencies in which we conduct business did strengthen against the dollar near the end of the quarter.

About $1.7 million of that comparative revenue shortfall is in the Food Safety segment as the majority of our international businesses report in through this segment. This shortfall was offset by a $500,000 currency tailwind in our Australian operations, which report in through animal safety as the Aussie dollar strengthened relative to the U.S.

dollar. Revenues for the Food Safety segment were $57.5 million in the second quarter of fiscal 2021, an increase of 1% compared to $56.9 million in last year's second quarter. The Food Safety segment continues to be impacted by COVID-related disruptions and slowdowns in some of our important end markets in the U.S.

and Europe, primarily with those customers, which support the restaurant, bar and other foodservice markets, such as primary schools and universities. We continue to get nice gains from our Soleris NG product line, which was introduced in July. Net gains in this product line were 13% for the quarter.

Our natural toxin product line was flat due to relatively clean harvest in most of our markets. Our allergen test kits rose 1% due to sluggish end market demand and competitive pressures. Revenues for our test to detect the presence of antibiotics in milk declined by 27% in the quarter.

This is due primarily to the lower demand in Eastern Europe from a large European distributor and we've begun direct sales in these markets to offset the lower distributor volumes. Revenues in our European operations rose 9% in U.S. dollars due to strength in our biosecurity product lines as COVID has continued to drive sales of these products.

Recent reports of a new strain of the coronavirus in the UK have the potential to impact our operations and overall business in the third quarter as the country has put more restrictions into place to mitigate its spread.

Our Brazilian operations rose 4% in local currency with increases across the food safety and genomics portfolio, partially offset by a $900,000 sale of insecticides in last year’s second quarter, which did not recur this year. And after adjusting for currency translation, revenues in Brazil declined by 22%.

Neogen Latino America, our business based in Mexico City, had strong 23% growth in the quarter in local currency, primarily on strength in sales of rodenticides, cleaners and disinfectants and genomics services. These gains offset some weakness in our food safety diagnostic kit markets caused by the COVID pandemic.

After adjusting for currency translation, the revenue gain was 13% for the quarter.

Our operations in China recorded a revenue increase of 51% in local currency, driven by strong sales of genomic services to the swine and dairy cattle markets, and increased sales of cleaners and disinfectants to address the ongoing COVID and African swine fever outbreaks in that country. After adjusting for currency translation, revenue grew by 59%.

Our Animal Safety segment had a strong second quarter, recording revenues of $57.5 million for the quarter, up 13% compared to the $50.9 million achieved in last year’s second quarter.

Animal care products sold out of our Lexington, Kentucky-based manufacturing and distribution center, such as small animal supplements, wound care and vitamin injectables, increased 22% and vet instruments, including needles and syringes, rose 17% for the quarter. These increases were primarily the result of the increased sales to our largest U.S.

distributors due to improving end market demand in the animal protein market. Rodenticides sales increased 24% in the quarter due to continued rodent pressure, primarily in the Pacific Northwest. Insecticide revenues rose 10% for the same period, aided by sales from the StandGuard product line we purchased in July of 2020.

Cleaner and disinfectant sales rose 4% for the quarter. Revenues in our genomics testing and bioinformatics business grew 11%, with continued market share gains in the companion animal parentage markets, driven by higher levels of spending in our pets and increased penetration in the retail veterinary market.

Commercial beef cattle markets continue to be strong in the US. Australia beef testing markets were also strong as herds there are being rebuilt after last year's devastating fires. Worldwide genomics revenues rose 12% with strong growth in the US, Australia and China, offset by slower growth in Europe.

Gross margins were 46.3% for the quarter compared to 47.3% in last year’s second quarter. The lower margins are due to a shift towards animal safety products, which have gross margins lower than the corporate average.

Additionally, sales increases within the food safety segment were from product lines, such as genomics and biosecurity products, which have lower gross margins than the diagnostic test kits sold in that segment. For the year-to-date gross margins are at 46.1% versus 47.4% last year.

Overall, operating expenses were up 4% or $1.2 million compared to last year’s second quarter and are up 1% for the year-to-date.

Of the $1.2 million increase, as I mentioned earlier, about $960,000 is due to strategic consulting, due-diligence and other legal and professional fees for acquisition activities, which ultimately did not come to fruition. John will discuss our activity in this area further in his comments.

Sales and marketing expenses decreased 1% for the quarter and are down 4% for the year-to-date, primarily from lower trade, lower travel, trade show and other customer facing activities, the result of continued travel restrictions from the pandemic.

Research and development expenses increased 7% over the prior year as we continue development spending on a number of products launched in the second quarter or scheduled to be launched in the second half of the year. Operating income for the second quarter was $19.2 million compared to $18.3 million in last year's second quarter.

Expressed as a percent of revenues operating income for the quarter was 16.7% compared to 16.9% last year. We recorded $555,000 in interest income for the quarter compared to $1.3 million in last year’s second quarter.

Rates on our marketable securities investments have dropped from an average of 1.5% last year at this time to about 15 basis points to 20 basis points.

Our effective tax rate for the second quarter was 17.8% compared to 15.3% in last year’s second quarter with the increase in rates driven primarily by lower benefit from the exercise of stock options due to lower exercise activity and lower estimated deductions for foreign derived income. Now I'd like to call up some nice working capital improvement.

We reduced our accounts receivable balances by $4.7 million from the beginning of the fiscal year and improved our day sales outstanding from 68 days at May 31st to 61 days at the end of November. We've been very focused on customer credit and collections during this pandemic and the results are showing.

Inventory levels at $92.5 million have declined by $2.6 million since year-end. We're making progress and continue to work on improving our inventory turns. We've generated $47.5 million in cash from operations during the first half of the year and have invested $11.1 million of that back in property, plant and equipment and other assets.

I'll stop now to echo John's comments that we were pleased to report increased revenues across the business. In this environment, sometimes staying even can be a win.

And the fact that we did achieved growth in both segments with robust growth in the animal safety segment and new product launches and building momentum in the food safety segment makes us optimistic for the second half of the year.

Our 1,800 employees worldwide continue to deliver in difficult operating environments and we remain proud of their ongoing efforts. At this point, I'll turn it back to John for further comments..

Thanks Steve. Neogen continues to lead the role in ensuring the safety of the world's food supply. I want to expand on Steve's mention that during the quarter, we incurred nearly $1 million in expenses for acquisitions that we ultimately did not win.

We were really excited about those businesses and I thought made very attractive offers to each of the sellers. While I was disappointed with the outcome, I was very pleased with our offers and the work done by the teams. We continue to have an aggressive corporate development pipeline, and have targets on all stages of the acquisition process.

We've expanded our approach and looked at over 90 companies large and small this calendar year. We will continue to be very active in our acquisition strategy and we'll add quality companies and technologies to the Neogen portfolio.

The next quarter or two, I just want to tell you I don’t think are going to be easy but I feel very optimistic about Neogen's future as we move into 2021 calendar year. We continue to be well positioned in our growing markets with the right people and products and the organizational strength to reach anywhere in the world where need exists.

We continue to benefit from the now well documented increase of spending on our pets, especially dogs and cats during the COVID era. Our global genomics operations recently marked the first time ever that we processed at least 500,000 samples in a single month and then they want to get and did it the next month.

That's a huge achievement and we're just getting started. Giving veterinarians and pet owners early information to improve the lives of their pets through our canine wellness test is an absolute game changer. We continue to lead the digital transformation in the company and the industry.

After launching our new e-commerce platform for food safety, we saw online orders increase by 29%. In December, we also expanded our e-commerce capabilities to include genomics and we look forward to great results. We haven't been to our Web site lately, I encourage you to check it out at neogen.com.

In addition to introducing new products to fight the global pandemic of COVID-19, we've also recently launched some significant new products from R&D pipeline, including our new test for gluten and meat speciation, as well as our improved method to test for allergens and food samples.

Our new Soleris next generation, which is an automatic test system that detects microorganisms continues to have tremendously positive global reaction, and has resulted in sales increase of 41% for that technology in the first six months of the year. As the world begins to recover from COVID-19, I'm optimistic about Neogen's future.

We've done exceptionally well through the pandemic and we're going to carry that success forward. I'm sure that you have many questions for us. I'm going to stop at this point and answer any questions from those of you that have joined the call..

We will now begin the question-and-answer session [Operator Instructions]. Our first question will come from David Westenberg with Guggenheim Securities. Please go ahead..

Hi. Thanks for taking the question and happy holidays to the Neogen team..

Thanks, David..

So, over the years, I mean, you've been very disciplined with your acquisitions. And I mean, if you look at the multiples, you've paid 1, 2 times, 3 times revenues historically.

I don't want to use the word not getting disciplined or getting undisciplined, because we are in an environment now where asset prices are just high across the board and interest rates are low. I mean, Steve noted in his remarks that you're getting almost nothing on the cash in the bank account now.

So can you talk about maybe where your valuation frameworks can go? I mean, how comfortable do you feel expanding your multiples to maybe 3 for from the 1 to 3 times sales range to maybe the 5 times range, just given the increasing competition in the space?.

Yes. David, I think that's a great question. And you're right, I mean, the deals that we've looked at have been really extremely competitive. And we have put out that I thought were very aggressive and compelling offers and we – they're great offers for the seller.

And all they need is one person that's a little bit off the reservation and that's what it goes for. And so while I thought some of the things we did really were strong offers and really strong from a standpoint and strong for the business and strong -- a little bit stronger than what Neogen would historically do.

Ultimately, we didn't win it on a couple of these. And I think what it does is it showed us a couple of things. One is we can move very quickly. The team performed extremely well in these processes. We have great advisers. We've got a super strong team on this.

So that gave me a lot of confidence to continue to go and look at large and small acquisitions across the world for us to try to get stuff done. So we're going to get some across the finish line. It's just we didn't get some of the ones that we spent some money on..

Let me ask this a little bit different way. I think, historically, because Neogen's such so integrated from the dinner plate to the restaurant, you worked with a lot of small family businesses over the years and you've been able to kind of nurture relationship that at least leads to an acquisition at a fairly decent or let's say value multiple.

When you look at your pipeline of acquisitions, are some of those assets maybe in there where you think you – the high probability of getting done?.

Yes, you'll see. I mean, the pipeline has that. We have relationships that we've cultivated over the last decade, working with different distributors and different partners. We have relationships of where we went out and sought out different technologies and are building relationship companies that way.

And we have the traditional auction type processes that we go through. So yes, there's all three of those in the pipelines today..

Perfect. I'm just going to ask two more and hop back in queue..

Okay..

Can you talk about -- you talked about next couple of quarters are going to be tough just with the outbreak. Can you talk about maybe some of the regional sales mix that you've seen in relation to like COVID-19 outbreaks? For example, I mean, you have customers in the Dakotas and Wisconsin and that area. And they got hit really hard with the pandemic.

And now as we get deeper into the winter, I'm just kind of curious where you think -- or how we could think about as the pandemic deepens what impact that's having using kind of the regional – the regions where we've seen it hit the hardest as kind of a barometer or some sort of gauge?.

Yes. I mean, I think it's tough regionally, David, because right now it's everywhere. And we're seeing -- and what I mean by it's going to be tough is operating in this environment is extremely difficult.

Keeping your plants open, keeping your employees safe, keeping your supply chains going, making sure that -- it's so odd, because you don't think about different pieces.

I mean, we're in the middle of the pandemic and things are changing, and all of a sudden you realize that there's a small plastic part that no one had any thought or recognize that now it's going to be used for COVID testing and now you can't get it.

Or a glass vial that we have used for 30 years that now all of a sudden is being taken for another market, and you've got to figure out how you're going to do that. I mean, you had constant supply for 30-years and all of a sudden, it starts to get tight. So that's the challenge.

And then it's keeping the plants operating and running when you've got so many people that are getting sick. And we really pushed in the fall to kind of -- to build up excess manpower, so we could keep going. We've done that. The team has performed extraordinarily well.

But we have certain locations when we're in small communities when that community gets hit, it gets really, really difficult to continue to have a constant supply. So that's what I mean about that, and it's in addition to the end market.

With the further restrictions put down around restaurants, bars and others, what we're seeing in Europe, I mean, our European team has now worked in the last 72 hours non-stop, because when we were shipping product out of the UK, now France has said no trucks are coming from the UK for 48 hours.

Well, good thing we're playing to head and we bought the business in Italy and started developing our European operating system. But now that means we've got to move everything that we were shipping to the UK out of Italy, we started planning. We have to build the work. We've got to build up inventories in the warehouse.

We hope to have another European site up and running here very shortly. So all of these things we're doing on a real-time basis, right, and it's not only that we have customers that are shutting down, but we have vendors that are shutting down, and we have supply chain that is being broken.

And it's just all these different complexities that the teams are doing every single day to keep our customers supply to the products they need to keep the world's food supply safe. So it’s not a – I don't think it's like a -- I don't expect bad quarters.

I'm just telling you, it's going to be really, really tough and the team has done a great job in the last ones, and we think they're going to do a great job in the next couple of quarters, too..

Got it. Hopefully, this will be a shorter -- I feel like I'm taking up all of everyone's time. So hopefully, this answer is shorter. When I think of Neogen and kind of the longer-term opportunity, I think about the high-growth products in food safety testing, like Raptor or Listeria now, those kind of products.

It was a - they were muted -- I think the segment safety testing was a little bit muted again this quarter.

Do you still see it as a long-term 10% plus grower with margin accretive for the business? And when can we start to see that start to happen?.

I do and I think you're starting to see it, David, because I think if you remember, it was either last quarter or two quarters ago, the industry was down 11% and we were flat. The industry down this quarter was basically down mid single digits. So if the industry is improving a bit and we were up 1%, so we continue to outperform the industry.

But I see that food safety market getting a little bit better. Again, it's tough because if we have -- all of a sudden we get slammed with more shutdowns, it just affects across the whole segment. I mean for example, if you think about poultry producers, the majority of that poultry product goes into restaurants.

And when restaurants get shutdown, you just don't need as much chicken. It's odd but it's true. So that will have an impact not only on our food safety customers but also our animal safety customers. So we need to get the vaccine out there. We need to get everybody to get vaccinated.

We need to get this economy open and running and we're going to be right back up to those numbers we were used to..

Our next question comes from John Kreger with William Blair..

John, just to follow up on the last question, given the supply chain stress.

Are you having any difficulty filling orders, is there sort of a growing backlog that we should be thinking about?.

We do have some back order issues. We are working as hard as we can to fill those and to make sure that we're helping push customers across. I wouldn't do it from a modeling standpoint that I can say that we've got -- I wouldn't say it's material, but it is for us because we hate back orders, John.

We don't like it when we don't give our customers what they need. But no, we are having some back order challenges because of supply chain issues..

And then John, within food safety from your perspective, is there visibility to get the business growing again, while we still have COVID? Or is it just one of these things you're just going to kind of be in survival mode and more flattish until the virus counts go down?.

No. I mean, look, it's so hard to say, right? Because if Europe shuts down because of the new variant coming out of the UK, that's going to be really tough. But no, I'm optimistic we're going to grow. I mean we grew this quarter and it was a tough, tough quarter. I think we're going to grow next quarter too.

And that's the great thing about Neogen, John, is that the team just finds a way to get it done. It doesn't matter. It doesn't matter if it's shut down or logistics are bad, the team just finds a ways to get done. So I think we're going to have growth. I think it's going to be really, really tough.

I hope you guys give the team a little credit because it's not going to be easy, but I think we will..

Steve, a question for you. You guys called out, I think some distributor acquisitions in the last year as well as StandGuard addition.

Can you quantify the impact on revenues from that?.

For the quarter, the acquisition revenues were about $2 million, all in and year-to-date, that's about $3.6 million..

And then one more. Can you give us the breakdown of international versus domestic sales? And it sounded like the international sales are generally coming in better. But if you could just quantify that, that would be helpful..

So international as a percent of the total for the quarter was about 39.3% and for the year-to-date, that's 38.9% so virtually the same kind of percentage..

Our next question will come from Mark Connelly with Stephens..

John, you talked about detectable needles recently. So two questions. How much of that sale will be incremental versus cannibalizing existing sales? And second, with the pickup that you're reporting in vet instruments, I was hoping you could give us some color on that.

Do you see us coming out of the slump or are you still cautious about there?.

So regarding our new patent pending needles and syringe, that's going to be -- what we're trying to do there, Mark, is to continue to defend our leadership position with our detectable needles.

So I don't know if I'm going to get a big bump in expansion, but it's going to protect us from when we lose that patent, people doing a knock off because they're already coming with the next-generation that's better. Regarding the animal safety, I think you're right. I think the animal safety segment actually was pretty good for the quarter.

I think that whole market was up mid-single digits. When you take a look across the industry, I think there's been extreme volatility in the dairy market, which has been tough.

I mean, the Class-III fluid milk went from $15 to $20 back to $15 in like an eight week period, which is kind of unprecedented because that milk generally trades between $14 and $16 over the last five years. But that just shows kind of the uncertainty in the market. And that milk goes to cheese production.

So cheese production was up, and then we were exporting, dairy guys were making money, beef guys were making money little bit of breakeven. Swine guys were doing well until this month, until December, and they've dropped a little bit below breakeven.

But I thought the animal health, especially in the production market, I thought it firmed up quite a bit, and companion looked really good. I'm just disappointed I don't have more companion products. And that's why we're launching our canine wellness test, which I'm just really, really excited about.

This test is going to give us the ability that when you bring in a new puppy, rather than just doing a parentage test to understand what the dog is, and that's an interesting test. This is going to allow you to understand kind of what some of the issues could be with that pet going forward.

So what are some of the things that -- from a genetic standpoint, and that we can look for certain types of cancers. We can look for certain types of things that are going to being affect the dog long-term, and we can put preventive measures in place to help us address that today.

So it includes risk markets for genetically complex conditions and nobody else has that. Nobody else has anything that can do that. And so it's going to let the vet be a very active participant in that pet's life with the pet parent for the whole life of the pet. So we just launched that.

We've got some vet clinics that are already buying it and using it. And so far it's been really well received but nobody else get anything like it in the market, and it's really cool..

John, how do you capitalize on that beyond what we have just launched. You've highlighted the companion animal space as a big opportunity before.

Do you think you'll be growing that space mainly through acquisition or is there a pipeline of products that you're working on?.

A little bit of both. So from a pipeline standpoint, our ThyroKare product is going to come back to market here soon, which is going to be great for us. That's been off the market for a long time now for us, four years. So that's a big opportunity for us going forward. And that's our own pipeline. But we looked at a lot of different things.

And one of those areas that we're looking for products and to expand our portfolio through acquisition is in the pet segment..

And just a question for Steve.

When we look at what's happening with currencies, can you talk a little bit about your ability to pass through higher costs and whether the appreciation that we're seeing, particularly in Brazil, is going to make it harder for you to catch up?.

Yes, I mean we do pass on price increases in the markets where we have significant currency movements. And your question about Brazil? Yes, it's tough, though, Mark, because as you know, when you get like a big 20-plus devaluation, I can't just raise the price 20-plus percent in US dollars because that's what I'm based on. So we manage that.

We do take some price increases, but we have to be cognizant of the fact that we're dealing with a lot of different competitors. You've got to deal with local Brazilian competitors, Chinese competitors, European competitors. So we do the best we can but we are cognizant of the fact that when there's big currency jumps, I can't get it all back.

But just like when we have a big currency appreciation, I don't drop the price by 20% either..

Our next question will come from David Westenberg with Guggenheim Securities..

In terms of just sticking on the acquisition theme, are there any concerns with what private equity is doing? I know Jim used to kind of say something along -- I forgot it saying, but it is something like welcome to the industry or something along the lines of that.

I'm not saying you're intimidated at all by private equity kind of imitating the Neogenomics model, but would there be any kind of reaction or that you would need to make in terms of either acquisitions that you're making or business strategy with kind of an incoming private equity interest in imitating the Neogen model?.

Yes. I think it's a good point. What we look at, David, is we're trying to always look at who are potential competitors, what can they do, what does it look like? But what we do is we look at the markets we want to participate in and we look at the technologies we want to participate in.

And then we go find the best companies that fit that and try to bring them into the portfolio and we take a little bit longer term view. So one of the acquisitions I like, that I really liked and lost went to private equity. And so what I'm doing is I still like that market. So I will invest in that market.

But at the same time, I know within three to five years, I can buy that business anyway because they're not going to hold it. So I take a little bit different approach on it. I think, yes, they get in, they're not long term. We're pretty committed to the markets we like, and we're going to continue to grow those markets and go after them.

And knowing that they're generally short-term players and we're looking at the long term, and we could probably always add that to the portfolio later..

And then just going back to the companion animal market, the health screen diagnostic test that you're launching, are anywhere you can frame -- can you frame us maybe market size, growth rates, margin impacts? Any kind of color you can give us there? I realized that the test is brand new, but maybe just some frameworks to help us think about how it can contribute to both top and bottom line..

I think if you want to frame the market, and I don't have the numbers in front of me, David, but I think we can get them to you later. How many new puppies are taken in for wellness every year? So I look at that as there's constantly a new set of puppies coming into the market every year.

So if you look at that as kind of the market potential and then multiply that by the cost of the test, that's kind of how I frame the market. I don't have that right now. And I can't remember, 80,000 sticking to my head, but that's way too low. I'm trying to remember what it is. But we can get that number for you..

I think I just somewhat figured out, there's about $80 million in the US, that population grows. Something around $8 million, I would guess, something like $8 million I would guess….

$8 million -- yes, that's exactly….

With the life expectancy being 10 years or something. Okay.

So anyway, and that was -- that is margin accretive business, I would think, maybe not?.

Yes, it is..

And then you have the companion cleaning products. This is kind of a follow up to the previous question. You have the companion cleaning products. You now have this health screening.

I mean, how do you think about your sales force building out in terms of going after veterinary markets? I know you have not a giant veterinary sales force, but is there any room to grow that? And that's my last question..

Yes, there is, David. And that's kind of how we're approaching it too with this test. We know the largest multi hospital owners in the country. We're going to them first with our team as a way to kind of drive that business forward through our key accounts teams. So we're absolutely doing exactly what you're talking about..

[Operator Instruction] There are being no further questions. This will conclude our question-and-answer session. I would like to turn the conference back over to John Adent for any closing remarks..

Thank you, Graham. Now I just want to close by wishing you and all your families a very happy holidays and really looking forward, and I hope we have a fantastic 2021. So thank you, everyone, and thank you for your support in Neogen..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..