Earnings call transcript: Neogen Q4 2025 beats EPS forecast, stock dips premarket

Neogen Corporation (NEOG) reported its fourth-quarter 2025 earnings, surprising analysts with an earnings per share (EPS) of $0.05, significantly beating the forecast of -$0.03. Revenue also surpassed expectations, reaching $225.5 million compared to the projected $221.92 million. According to InvestingPro analysis, the stock appears undervalued at current levels, despite falling 3.69% in premarket trading. The company has shown significant momentum recently, with a 7.97% return over the past week.

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Key Takeaways

• Neogen’s Q4 2025 EPS of $0.05 exceeded expectations by 266.67%.
• Revenue reached $225.5 million, surpassing forecasts by 1.61%.
• Stock dropped 3.69% in premarket trading, possibly due to broader market concerns.
• The company faces challenges in production efficiency and market dynamics.
• Guidance for FY2026 indicates expected revenue growth in the latter half.

Company Performance

Neogen Corporation showed resilience in a challenging market environment, with its earnings and revenue both exceeding analyst expectations. The company’s performance was bolstered by strategic initiatives in food safety testing and pathogen detection technologies, despite a recorded 2.9% decline in core revenue. The industry continues to face headwinds from declining food production volumes and inflation-pressured consumer spending.

Financial Highlights

• Revenue: $225.5 million, up from the forecasted $221.92 million
• Earnings per share: $0.05, compared to a forecast of -$0.03
• Gross margin: 41.2%
• Adjusted EBITDA: $41 million, an 18% margin
• Adjusted net income: $11 million

Earnings vs. Forecast

Neogen’s Q4 2025 EPS of $0.05 was a notable 266.67% above the forecasted -$0.03, marking a significant positive surprise. The revenue also exceeded expectations, coming in 1.61% higher than anticipated. This performance contrasts with previous quarters, indicating a potential turnaround despite ongoing market challenges.

Market Reaction

Despite the earnings beat, Neogen’s stock price fell by 3.69% in premarket trading to $5.22. This decline may reflect broader market trends or investor caution due to production inefficiencies and global trade uncertainties affecting the company’s outlook. With a beta of 1.77, the stock shows higher volatility than the broader market. While trading 40% above its 52-week low of $3.87, it remains significantly below its high of $18.58, having declined 52.87% over the past six months.

Outlook & Guidance

Looking ahead, Neogen projects FY2026 revenue between $820 million and $840 million, with adjusted EBITDA expected to range from $165 million to $175 million. The company anticipates revenue growth in the second half of the fiscal year and is focusing on operational improvements and cash flow positivity. Analyst consensus remains cautiously optimistic, with price targets ranging from $5 to $10 per share.

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Executive Commentary

"Our core mission, helping to protect the world’s food supply, has never been more relevant," stated CEO John Adent, highlighting the company’s strategic focus on food safety. He also noted, "We are taking clear steps to address the sample collection production challenges," emphasizing Neogen’s commitment to operational efficiency.

Risks and Challenges

• Production inefficiencies in sample collection could impact future performance.
• Global trade uncertainties and tariffs pose a $10 million annualized headwind.
• Declining food production volumes and inflation may pressure revenue growth.
• Market dynamics in the food safety testing sector are evolving at a slower pace.
• The transition of leadership with incoming CEO Mike may bring strategic shifts.

Q&A

During the earnings call, analysts inquired about the macroeconomic environment and its impact on Neogen’s performance. The management addressed concerns about tariffs and their financial implications, as well as the strategic transition at the Petrifilm facility. These discussions highlighted the challenges and strategic responses shaping Neogen’s path forward.

Full transcript - Neogen Corporation (NEOG) Q4 2025:

Conference Operator: Good morning, ladies and gentlemen. Welcome to Neogen Corporation Fourth Quarter FY twenty twenty five Earnings Call. This call is being recorded on Tuesday, 07/29/2025. I would now like to turn the conference over to Bill Walke. Please go ahead.

Bill Walke, Investor Relations, Neogen Corporation: Thank you for joining us this morning for the discussion of the fourth quarter of our 2025 fiscal year. I’ll briefly cover the non GAAP and forward looking language before passing the call over to our CEO, John Adent, who will be followed by our CFO and COO, Dave Zemura. Before the market opened today, we published our fourth quarter results as well as a presentation with both documents available in the Investor Relations section of our website. On our call this morning, we will refer to certain non GAAP financial measures that we believe are useful in evaluating our performance. Reconciliations of historical non GAAP financial measures are included in our earnings release and the presentation, Slide two of which provides a reminder that our remarks will include forward looking statements within the meaning of the Private Securities Litigation Reform Act.

These forward looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward looking statements. These risks include, among others, matters that we have described in our most recent annual report on Form 10 ks and in other filings we make with the SEC. We disclaim any obligation to update these forward looking statements. I’ll now turn things over to John. Thanks, Bill.

Good morning, everyone, and welcome to the earnings call for the fourth quarter of our 2025 fiscal year. You may have seen the

John Adent, CEO, Neogen Corporation: press release issued last week announcing the board has identified my successor as CEO, and I will be officially stepping down from the role in a couple of weeks. I remain committed to ensuring a smooth transition for our customers and employees, and we’ll work with Mike as needed as he takes the helm of a company that I believe is well positioned to capitalize on the significant potential ahead of it. Now moving on to some color for the quarter. The end market conditions that we saw worsen over the course of the third quarter continued into the fourth quarter, particularly in food safety. With consumers continuing to be under pressure from the cumulative inflation over the last four years, we estimate that many food producers are still experiencing year over year declines in their production volumes, with many of them not expecting this trend to meaningfully reverse in the near future.

Our view is that the food safety end market is still able to grow in this environment, but certainly not at the mid to high single digit levels we believe it has historically seen. As it relates to the regulatory environment in The U. S. Specifically, there have been cuts made at both the USDA and FDA. To date, these cuts have primarily been in areas outside of normal course food safety testing and impacted things like avian flu testing in milk, the emergency response network focused on bioterrorism and certain local food assistance programs.

The USDA and FDA are interacting more with state and local agencies in an effort to improve efficiency and responsiveness, and both agencies appear to be fully committed to continuing their mission of food safety. In fact, in the last two weeks, the USDA Food Safety and Inspection Service, or FSIS, announced their food safety policy plan and separately their fiscal twenty twenty five research priorities. The key tenants of the food safety policy plan were announced at the grand opening of a new state of the art USDA facility in St. Louis, Missouri. I won’t run through all of them, but the first of these key tenants is enhanced microbiological testing and inspection oversight.

USDA is placing particular emphasis on listeria and detecting results quicker and for a broader set of species. In 2025 so far, the FSIS has increased the volume of samples that is tested for Listeria by over 200% and uses the Neogen Molecular Detection System, or MDS, as its primary method. It is also performing more robust in person food safety assessments at an increasing rate, with the intent of proactively identifying and addressing potential food safety concerns and a priority placed on ready to eat meat and poultry facilities. In 2025, the number of these assessments conducted is up by over 50% to date. Another key tenet of the USDA plan is charging ahead to reduce salmonella illnesses.

In April, the USDA withdrew the previously proposed salmonella framework that would have extended beyond raw breaded stuffed chicken to include all poultry products. This appears to have been done mainly as a result of practical complications of implementing the framework as proposed and not due to any lack of commitment by the USDA to address salmonella illnesses. The agency has said they are convening discussions with key stakeholders in the development of a new common sense strategy to address Salmonella, and we view it as a question of when, not if, a revised Salmonella framework is proposed. A few days after the food safety policy plan was announced, FSIS released their research priorities for fiscal twenty twenty five in which the prevention, detection and analysis of pathogens, particularly Salmonella and Capleobacter, are prominent studies. While responsibility for food safety ultimately lies with the producers, we are not dependent on the regulatory action to drive growth.

It is certainly a positive to see this prioritization of food safety in the administration. On the topic of the enhanced focus on microbiological testing, just yesterday, we announced the launch of our Listeria Right Now for use on our MDS platform for pathogens. MDS utilizes loop mediated isothermal amplification, providing customers the opportunity to use one robust platform for the fast detection of environmental pathogens in up to 96 samples per cycle. The pathogen detection market is one of our top priorities, and we are continuing to invest in the development of additional assays to ensure customers have access to fast, accurate results in order to minimize the risk of product recall or disposal costs and help keep contaminated products from reaching our customers. In our Animal Safety segment, we believe we continue to work through an environment that is in a cyclical trough.

Net farm incomes are expected to improve in 2025. However, the size of the cattle herd, on which most of our animal safety business is focused, has declined for several years and is currently at a seventy year low. Inventory levels in the channel remain largely stable, but the veterinary distributors and ag retailers through which we go to market seem to be taking a cautious approach given the broader market uncertainty. For our Genomics business in total, fourth quarter core revenue growth improved sequentially and was down low single digits on a year over year basis. Strong core growth in the bovine business was offset by expected declines in companion animal and other markets.

We’ve disclosed that we have a process underway to divest this business and we have seen a strong level of interest. The process continues to progress, but we won’t be commenting beyond that given the active nature of the project. This portfolio action, in addition to the recently completed cleaners and disinfectants divestiture, will help to simplify the business and focus our efforts on core areas while also accelerating our deleveraging. Although we are currently in a pause as it relates to some of the steeper tariff rates that have been in effect, the uncertainty has persisted with numerous discussions with key U. S.

Trade partners still underway. Our most recent communication on tariffs was that we expected a $5,000,000 annualized impact on a fully mitigated basis. We have now had an additional two months to assess the landscape and believe this impact is likely to be closer to $10,000,000 on an annualized basis given the status of surcharges, competitor actions and the timing of certain resourcing opportunities. We expect the trade environment to remain dynamic and plan to continue to take actions to mitigate our exposure. Our new Pikachu film facility continues to progress well, but our expectation remains that initial testing production will begin in a few months.

Once Petrifilm production is fully up and running, our intent is to move some additional product lines that we have in Lansing into the new facility, which will affect overhead absorption rates. We’ve been able to complete this detailed overhead analysis and also refine our buildup of the bill of material and labor costs with the most current information available. This work has validated our previous estimates and suggest that Petrifilm gross margins in our facility, once fully running, will be slightly better than what we see today on sales of these products made by our transition manufacturing partner. Future film is clearly an important product line for the company. We made additions to the team and implemented an enhanced governance process to ensure the remainder of the integration is derisked as much as possible during the eventual gradual transition of production from our transition manufacturing partner to our own facility.

We saw improved output of sample collection production during the quarter, which enabled a sequential revenue improvement of around 50% in the overall product category, although it remained lower than prior year levels. The challenge with achieving these higher rates is that we were very inefficient in doing so. The production equipment is of an advanced age, and we continue to struggle with sustaining consistent uptime of the automated processes, which is causing us to produce a significant amount of products manually. Our experience so far in the first quarter has continued to be inconsistent. We are, however, seeing reductions in backorders and hopefully a more normalized production rate, combined with our engineering efforts, will allow productivity to improve in the coming quarters.

Given the softer market backdrop, we are squarely focused on controlling what we can in order to put the company in the best position to capitalize as conditions improve. To that end, you may have seen the targeted improvement plan we released last month. This is effectively the near term blueprint in place for managing through the current transition period for Neogen. As we mentioned on our prior earnings call, we are undertaking actions to accelerate the building of a more profitable focused Neogen. We believe that rigorously managing these discrete items with a focus on improved execution will maximize the company’s ability to take full advantage of its position in attractive end markets.

I’ll now turn the call over to Dave for some more insights into our results for the quarter and our outlook for the year.

Dave Zemura, CFO and COO, Neogen Corporation: Thank you, John, and welcome to everyone on the call today. Jumping into the results, our fourth quarter revenues were $225,000,000 Core revenue, which excludes the impact of foreign currency, acquisitions and discontinued product lines, was down two ninety basis points for the quarter, while foreign currency and discontinued products were a headwind of 190 basis points compared to the prior year. At the segment level, revenues in our Food Safety segment were 162,000,000 in the quarter, down 3% compared to the prior year, including a core revenue decline of 1.3%. We saw growth in biosecurity products as well as in the bacterial and general sanitation product category, which benefited from strong growth in pathogen detection products. In the Indicated Testing, Culture Media and Other product category, solid new product growth in our Food Quality product line was offset by the decline in sample collection as well as a decline in petri film that was mostly compare driven.

Outside of the sample collection issues, Food Safety core revenue was up low single digits in Q4 and mid single digits for the full fiscal year. Quarterly revenues in the Animal Safety segment were $64,000,000 which includes a core revenue decline of 6.7% compared to the prior year quarter. Solid growth in our small animal supplements and rodenticides product lines was offset by declines in the rest of our major products. As we discussed, we believe this end market has been in or around a trough for several quarters now. Excluding genomics, the Animal Safety segment has had core revenue growth at a compound annual rate of 3.5% over the last four fiscal years.

This is below the typical through the cycle growth rate, but about what we would expect, for three of those four years representing periods of weakening market conditions. Genomics core revenue declined low single digits in Q4, reflecting a sequential improvement and benefits from refocusing the business on more attractive end market opportunities. From a regional perspective, core revenue growth in the fourth quarter was mixed. Growth was led by our Europe region, up mid single digits, with strong sales of pathogen and food quality products as well as petrifilm, partially offset by a decline in sample collection. Asia Pacific core revenue was down mid single digits on a year over year basis with solid growth in pathogen detection offset by declines in most other major product categories with some impact from the global trade uncertainty we’ve experienced, particularly in China.

After several quarters of strong growth, our Latin America region was down mid single digits on a core basis, with growth in culture media and general microbiology products offset by declines in general sanitation testing, sample collection and petri film, which faced a very difficult compare against the prior year quarter. In our U. S. And Canada region, food safety core revenue improved sequentially to low single digit growth. Solid growth in our food quality, allergen and pathogen product categories was partially offset by declines in most other major food safety product categories as well as declines in the Animal Safety segment.

Gross margin in the fourth quarter was 41.2%, which was primarily impacted by lower volume, elevated inventory write offs, sample collection production inefficiencies and some tariff impact. Given the focus on improving our internal processes around inventory planning, we believe the fourth quarter should be the peak of these costs and that we will see a benefit from these improvements in fiscal twenty twenty six. For sample collection, we’ve discussed that as part of the integration of the three ms business, we relocated this production to a Neogen facility and have been operating with a very high level of inefficiency. We noted that revenue in Q4, although still down year over year, represented a significant sequential improvement from Q3, but was achieved with significant inefficiencies. The elevated level of manual work is causing us to incur costs for expensive temporary labor and excessive scrap rates.

We have multiple work streams underway in parallel to address this challenge, including reviewing potential opportunities to involve global manufacturing partners with certain areas of the product line. We continue to have periods of improvement followed by setbacks and clear line of sight to consistent performance at higher output levels will likely be a gradual progression over the coming quarters. Adjusted EBITDA was €41,000,000 in the quarter, representing a margin of 18%. In addition to lower volume, the adjusted EBITDA margin was negatively impacted by the previously covered inventory write offs, tariffs and sample collection inefficiencies, a portion of which were not considered start up costs, but rather run rate inefficiencies. The elevated inventory write offs negatively impacted adjusted EBITDA margin by a few 100 basis points compared to what we had anticipated.

The tariff impact was driven by some purchases that were en route, particularly from China prior to the current pause going into effect and subject to the higher rates. And there was also some time lag in the implementation of our offsetting actions. Fourth quarter adjusted net income and adjusted earnings per share were $11,000,000 and $05 respectively compared to $22,000,000 and $0.10 in the prior year quarter due primarily to the lower adjusted EBITDA, which more than offset the lower interest expense and effective tax rate. During the fourth quarter, in connection with our annual goodwill valuation assessment, we further impaired the carrying value of goodwill primarily associated with the three ms Food Safety Division acquisition. As we have seen end market conditions weaken and some impacts from the global trade environment as well as inconsistent execution in our startup of sample collection production, we determined that a further impairment under U.

S. GAAP was warranted and recorded an additional $598,000,000 noncash charge. Moving to the balance sheet. We ended the quarter with gross debt of $900,000,000 61% of which is at a fixed rate and a total cash position of 129,000,000 Just under two weeks ago, we completed the divestiture of our cleaners and disinfectants business, which resulted in approximately $115,000,000 in net proceeds that will be used to pay down $100,000,000 of debt in Q1. On a pro form a basis, this would reduce our net leverage by approximately 0.4 turns.

Free cash flow in Q4 was roughly breakeven, representing an improvement of $14,000,000 compared to Q3, but lower than we had anticipated due to lower EBITDA, some pull forward of CapEx from fiscal twenty twenty six and the timing of certain international cash taxes. Total capital expenditures declined to $16,000,000 in Q4, a trend we expect to continue substantially lower CapEx in fiscal twenty twenty six compared to fiscal twenty twenty five. Moving to our outlook. We are not assuming the current end market conditions will improve meaningfully over the course of the fiscal year. The cumulative effect on the consumer from the protracted period of elevated inflation and the related pressure on overall food production are conditions we currently expect to continue through fiscal year ’twenty six.

Until we see signs that the animal safety market is beginning to meaningfully improve, our expectation is that we will continue to work through the trough of the cycle. In addition to the underlying market weakness, we see indications that the uncertain global trade environment is having some effect on food producers’ importexport planning as well as distributors’ purchase decisions. Taking these factors into account, our current expectation is for revenue to be between $820,000,000 and $840,000,000 which excludes ten point five months of annualized revenue from our cleaners and disinfectants business, which was in the low $60,000,000 in fiscal twenty twenty five. Our current view is that revenue in the 2026 will be higher than in the first half due in part to the normal seasonality of the business. Regarding adjusted EBITDA, our current expectation is a range of $165,000,000 to $175,000,000 which similarly excludes ten point five months of an annualized EBITDA impact of approximately $11,000,000 from cleaners and disinfectants.

Compared to fiscal twenty twenty five, we are planning for gross margin in fiscal twenty twenty six to include a tailwind from lower inventory write offs and headwinds from sample collection and tariffs, which will flow through to impact adjusted EBITDA. Our work to reduce these headwinds continues, but we believe it is prudent to reflect them in our outlook. Accordingly, we would anticipate higher adjusted EBITDA margins in the second half of the as we make improvements in these areas and also benefit from the higher expected second half revenue from normal seasonality. Due in part to our expectation of capital expenditures coming down significantly to approximately 50,000,000 we expect free cash flow in fiscal twenty twenty six will be positive. Finally, I am pleased to share that we have successfully remediated two of the Sarbanes Oxley material weaknesses, which will be reflected in the upcoming filing of our 10 ks.

I’ll now hand the call back to John for some final thoughts.

John Adent, CEO, Neogen Corporation: Thanks, Dave. Before we wrap up today’s call, I want to thank you for your engagement and support as the company progresses into the later stages of the integration of the former three ms Food Safety business. While we have made significant progress, the integration has been complex and we’ve had some execution shortfalls, which have been exacerbated by the soft end market conditions, foreign currency headwinds, and more recently the global trade environment. We are taking clear steps to address the sample collection production challenges and in parallel implementing pricing actions to improve the profitability. As it relates to inventory, we are implementing more robust planning and coordination across the key organizational functions and expect to see a decreasing impact from this issue moving forward.

At the same time, I want to emphasize that we believe the company is well positioned, particularly in the attractive food safety end market and that our long term growth drivers remain fully intact. Our core mission, helping to protect the world’s food supply has never been more relevant. The global food system is under increasing pressure to be safer, more transparent, and more resilient. We believe the regulatory backdrop is favorable, particularly in The U. S, with the USDA having made key announcements this month focused on the priority of food safety.

We have a long history as a trusted food safety partner and source of expertise for our customers resulting from our over forty plus years in the industry. Our commercial teams, in combination with our leading product portfolio and innovation opportunities, should be valuable partners for both customers and regulators to maximize the effectiveness of their food safety efforts. I’d like to once again thank the Neogen team for their dedication and perseverance throughout my tenure at the company. We’ve faced and overcome real challenges, and the team is entirely focused on the road ahead and executing our improvement plan with precision. I’m excited about the positive future I believe is in store for the company.

I’ll now turn things over to the operator to begin the Q and A.

Conference Operator: Thank you. With that, our first question comes from the line of Subbu Nambi with Guggenheim.

Subbu Nambi, Analyst, Guggenheim: Hey, guys. Good morning. Thank you for taking my question. At this time, it might have a new CEO appointment. Why is this the right time to put out guidance, and why are these the right numbers?

How much students is built in?

Dave Zemura, CFO and COO, Neogen Corporation: Yeah. Hey, Subbu. Good morning. Look. I think at the end of the day, we still have a position here that we wanna give people color as to where the year’s going.

We tried to take into account that there would be a change, but, you know, I think we’re operating for going forward here like we usually would, and and, don’t think we’ve put, Mike in a position here where where we’ve, you know, signed him up for something that that that’s out of the ordinary for us. So it’s I guess, would characterize a little more business as usual.

Subbu Nambi, Analyst, Guggenheim: And then, David, along those lines, you articulated some of the assumptions here, Recognizing that you limited the tariffs impact to 10,000,000 annualized after supply actions, how much of a headwind is built for next year?

Dave Zemura, CFO and COO, Neogen Corporation: I’m so sorry. Can you repeat that part again about the 10,000,000? What I didn’t quite catch the question, Subbu.

Subbu Nambi, Analyst, Guggenheim: The tariffs impact that you have, sized it to 10,000,000 annualized after the issues, how much of a headwind is built in for next year?

Dave Zemura, CFO and COO, Neogen Corporation: Yeah. 10,000,000 is the headwind for fiscal twenty six that we’re trying to communicate.

Subbu Nambi, Analyst, Guggenheim: I see. I see. So Chris, that

Dave Zemura, CFO and COO, Neogen Corporation: is our previous okay. So would did I does that does that make sense? Did I answer your question?

Subbu Nambi, Analyst, Guggenheim: Yes, David. Yes. Yes. And then I have two questions. Real quick, I’ll recognizing there are others on the line.

We’ve seen some of the major food brands continue to emphasize that consumer backdrop is pressured just as you mentioned today. How do you work around that headwind this year? And then what are some of the ways that you’ll be able to grow above market?

Dave Zemura, CFO and COO, Neogen Corporation: Yeah. Look, I think what you see us coming into the year with is a view that that kind of carries in the market environment that that we that we experienced in the second half of the year. The sample collection here for us is an opportunity to drive additional volumes, but we’re being cautious about that given the inefficiencies that we’ve experienced. So I I think also and I’m gonna turn it over to John because we think there’s a regulatory backdrop in our portfolio that that provides us a nice opportunity. John, can you speak to that?

John Adent, CEO, Neogen Corporation: Yeah. Thanks, Dave. Yeah. So so I think a way to help us continue help us outgrow the market is to use the tail end of the regulatory. As we talked about, we saw that, you know, testing at FDA was up or USA was up almost 200 or FSIS was up 200% increase in Listeria on a pace because the the administration is really focusing on pathogen, whether that’s Listeria or Salmonella.

And we would think we’re really well aligned for that. Regarding Salmonella, you know, we’re working kinda with the National Chicken Council, Meat Institute, and FSIS to kinda develop a program, and we think that our MDS quant, salmonella, and stereotyping kits are really gonna provide the data that is gonna help them develop a robust program for this protein industry. So, you know, working with those constituents is gonna help us continue to grow.

Subbu Nambi, Analyst, Guggenheim: Thank you for that, David and John. And one last one real quick. What are you pointing investors to in terms of clear KPIs in regards to Petrofilm’s Q numbers transition, CapEx targets, or just other beyond just timing of these projects? I know you said q four is going to be the largest impact in terms of duplication cost, but anything else that you would point out when it comes to a Petrofloom transition?

Dave Zemura, CFO and COO, Neogen Corporation: Yeah. Thanks, Subbu. Clearly, we have a large reduction in capital expenditures year over year, and we’re gonna need we’ll stay within that envelope. The as we move into the transition period here, we’ve talked about starting test production. That is an important milestone.

And then as we proceed through test production, the degree to which we’re kind of certifying SKUs for saleable product, There’s 17 SKUs of petri film that’ll stand up over, you know, four or five quarters after we start test production, and that’ll be an important milestone that we that we take people through. So I think more to come here in a quarter as we work towards stand up.

Subbu Nambi, Analyst, Guggenheim: Thank you, guys.

Dave Zemura, CFO and COO, Neogen Corporation: Thank you, Subbu.

Conference Operator: And your next question comes from the line of Brandon Vasquez with William Blair. Please go ahead.

Brandon Vasquez, Analyst, William Blair: Hey, good morning, everyone. Thanks for taking the questions. The first one, I just wanted to focus a little bit on the macro side first and clarify. It sounds like, correct me if I’m wrong, are things getting incrementally worse on a sequential basis on the macro front? Anywhere that you can point to what what you think might be causing it getting worse, if I’m understanding that correctly?

And then maybe just talk about, you know, historically, we’ve said even though food volumes from the manufacturers are declining, the food testing segment is still growing somewhere in the mid single digits. Where do you guys expect that to be, over the next four quarters? What are you assuming within the guidance?

Dave Zemura, CFO and COO, Neogen Corporation: Yeah. Brandon, it it’s it’s a good question. So I think what we saw, kind of rewinding a little bit, is that we came through the third quarter. We saw softening of the macro environment as we work through the third. We saw that continue through the fourth, so sequentially a lower environment.

As you know, we developed some internal proxies that we use as a as an indicator of food production levels, and we saw that decrease sequentially q three to q four. And then, of course, we pay close attention to what some of our large larger broader customers are saying. So we think the environment remains soft, and we’re gonna see some we’re going to need to see some recovery in the macro for the consumer to get back to buying more volumes. As it relates to food safety industry growth, yes, we believe food safety testing grows even when production is negative, but we think it grows at a lower rate. I think if we rewind a year, we felt that was, you know, mid single.

It’s it might be lower than that now. It’s it’s difficult to tell. We think other than our sample collection issues, we grew low single in in the fourth on our food safety testing side. And and and we’ve really, for the year, assumed this kind of environment that we’ve exited the year is what we’re kinda carrying through the year. And and until we maybe see something different given some of the uncertainties out there, including some of the impacts of the global trade environment related uncertainty, we’ve kind of planned an environment not too dissimilar than what we experienced here in the second half of the year.

Brandon Vasquez, Analyst, William Blair: Okay. And just to clarify, Dave, on on what you just said there, it sounds like you you from what you can tell, you are growing in line with the food safety market, the food testing market, x sample handling at that low single digits clip. And for the most part, that’s kind of what you’re assuming for the rest of the year. Is that the right way to categorize that?

Dave Zemura, CFO and COO, Neogen Corporation: Yes, Brandon. Directionally, I think that’s right. Mean, I if we step back and look for the full year, would be 5%. So we think, you know, we’re we’re in that zone.

Brandon Vasquez, Analyst, William Blair: Okay. And then, Dave, maybe you can spend a minute just talking a little bit also about, like, is there any kind of sequential guidance you can give us whether it’s, kind of high level even on where margins go on a sequential basis through the year? There’s just a lot of moving pieces. Like, when do the tariffs really roll through inventory and meaningfully start impacting you? When does some of the OpEx of the disinfectants business kind of roll off?

Anything else in terms of when does the inventory management level off or sorry, not the inventory management, but the inventory write offs, when do those level off? Like, help us think about how we should be modeling the sequentials of margins through the year.

Dave Zemura, CFO and COO, Neogen Corporation: K. So we usually start the year with q one as our lowest quarter. And I think a combination of volumes plus some of the headwinds that we intend to make improvement upon over the course of the year, particularly sample collection, will most impact margins in the first quarter and will improve as the year progresses, and that’s kind of compounded with a lower volume environment. On the margin side, you know, I think we can we can point to some of the challenges we saw in the fourth and and see some pretty clear path to doing better this year, but we will get a full year of sample sample handling, which is which is very inefficient. We we have a path to doing better there, but it’s gonna take a few quarters at least here.

So I think we’ll see gradual improvement as well. I think all of these things are pointing to kind of directional improvement as the year progresses with some bias from a volume standpoint, usually towards the second half, maybe not as large as we’ve seen in prior years because we’ve taken cleaners and disinfectants out of the business, and that tended to drive a little bit of the seasonality and lumpiness. Does that help directionally, Brandon?

Brandon Vasquez, Analyst, William Blair: Yep, it does. And I’ll just ask one last one and let someone else hop in here. But as we think about obviously, you have the disinfectants that you’ve already announced as a divestiture. We’ll have genomics updates later in the year. When these businesses are divested and as we play with our model, it seems like maybe the biggest lever in terms of understanding what the standalone company or pro form a margins will be is essentially how much OpEx goes away with those businesses.

Is there anything you can share with us in terms of how quickly OpEx goes with those businesses? Will there be some stranded costs that need to come out? Will they take a couple of quarters? Any color around that would be helpful too. And I’ll let someone else hop in.

Thanks

Dave Zemura, CFO and COO, Neogen Corporation: guys. Yeah. So as we sell the businesses, the majority of the let’s talk about cleaners and disinfectants because that’s done. The majority of the related costs are direct costs that go directly with the business. There tends to be, you know, a million and a half to 2,000,000 of additional costs that remain behind.

We will be delayed in getting those out because we will continue to service under a TSA arrangement for a period of time, probably at least a full year here in the case of of this business, and then we’ll see some reductions. But, again, that may be a million and a half or so, not the biggest number. The majority of the costs go directly with the business. So thanks for the questions, Brandon.

Conference Operator: And your next question comes from the line of David Westenberg with Piper Sandler. Please go ahead.

John, Analyst, Piper Sandler: Hi. This is John on for Dave. Thanks for taking the questions. So just first off, could you give any commentary, like any thoughts on the key differences in the management styles between Mike and John, any different priorities and what we should be looking out for going forward?

Dave Zemura, CFO and COO, Neogen Corporation: Yeah. Look. You know, fair question. But, again, let’s remember Mike hasn’t started yet. And so, you know, I think I think we’ll see.

You know, getting to know Mike a little bit, you know, I think very much a back to basics guy, but, you know, he’ll he’ll he’ll start here in a few weeks, and and we’ll get into it. And I think as we do that, he’ll he’ll be looking forward to kinda meeting meeting you guys and sharing some of his philosophy in the coming quarters.

John, Analyst, Piper Sandler: Got it. Thank you. And you mentioned that genomics sequential improvement, particularly in bovine. Do you see that that business overall is stabilizing for fiscal ’twenty six? And can you give me thoughts on demand in the different species and use cases for it?

Dave Zemura, CFO and COO, Neogen Corporation: Yep. Look. If you if you recall back in midyear fiscal twenty five, we talked about a restructuring of that business, trying to refocus it on more attractive, cattle end market where we think we’re more highly differentiated. And with that, we brought down some of the second half revenue associated with genomics. I’d say the top line for genomics will be a a little less in in fiscal twenty six as compared to fiscal twenty five.

And, you know, I can’t break it down for you by species, but recall that it’s predominantly or the majority of the business is focused on the cattle end markets.

John, Analyst, Piper Sandler: Alright. Great. Thank you. I’ll jump back in the queue.

Dave Zemura, CFO and COO, Neogen Corporation: Thank you.

Conference Operator: Your next question comes from the line of Thomas DeVossey with Nephron Research. Please go ahead.

John Adent, CEO, Neogen Corporation: Can’t hear you, Tom, if you’re talking.

Dave Zemura, CFO and COO, Neogen Corporation: We might have a problem with Tom’s line.

Thomas DeVossey, Analyst, Nephron Research: Hi. Can you hear me now?

John Adent, CEO, Neogen Corporation: Yes. I hear you, Tom.

Thomas DeVossey, Analyst, Nephron Research: Okay. Hi. Sorry about that. So just on the food safety segment, in terms of the strength that you’ve seen, I guess, in the food quality pathogen product lines, would you say that you’ve seen some market share gain or addressing additional kind of unmet need? What has really driven, I guess, maybe the strengths in in, I guess, in pathogens, most specifically?

John Adent, CEO, Neogen Corporation: Sure, Tom. I can I can start with that? Think, look, we know that, pathogens have been a priority for us. We we’ve stated that that pathogens have been a priority, and part of that is some of the new launches we’ve done. Right?

We’ve talked a little bit about our MDS, Quantum MLL test that we just launched. And then we just did our Listeria right now on the MDS platform. So we are we are continuing to invest in the pathogen space. And with those, investments, we’re saying that we’re able to meet some of the needs where we didn’t have the product portfolio before that we do now. So we see that as a great opportunity for us to continue to drive growth in that pathogen space.

Thomas DeVossey, Analyst, Nephron Research: Got it. And just one other question on CapEx. For 2026, I think you mentioned $50,000,000 actually still a little bit lower than I was expecting. So just is part of the divestiture helping, you know, or, you know, was this kind of in line with, you know, maybe expected, CapEx step down, you know, over the kind of years since, the merger?

Dave Zemura, CFO and COO, Neogen Corporation: It’s all my I think combination of things. Maybe minimally from the divestiture that we did, but we also did see some CapEx pull forward into ’25 from ’26. So that brings it down, you know, a a few million as as well. And and look, we’re prioritizing the plant and and getting that work done as you know. So it you know, it’s what I think you see us here doing is also just kind of focusing on the our CapEx on the priority.

And so it’s a pretty good step down for us, as you point out. Thank you. Thanks, Tom.

Conference Operator: And we have no further questions at this time. I would like to turn it back to John Eden for closing remarks.

John Adent, CEO, Neogen Corporation: Thank you. Thank you all for joining us. We look forward to helping drive a I look forward to helping drive transition to Mike. We talked about, I will be here through the October and working with him and and really see great opportunities for Neogen in the future and excited to watch the growth of this company. So thank you very much.

Conference Operator: Thank you presenters. And ladies and gentlemen, this concludes today’s conference call. Thank you all for joining. You may now disconnect.

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