NEOGEN CORP Q3 FY2025 earnings call

• Progress on acquisition integration: Sample collection production has recovered to prior levels, and Petrifilm construction is complete with the first two production lines installed, aiming for initial test production in fall 2025.
• Business focus actions: Made solid progress on portfolio actions, with one in later stages and one in marketing phase, expected to be accretive to margins and prioritize net proceeds for debt repayment.
• Financial structure: Refinanced Term Loan A, extending maturity by nearly three years and realizing 60 basis points of interest rate savings, providing balance sheet flexibility.
• Team changes: Continued evolution of leadership team with new heads in R&D, North America Commercial Organization, etc., and ongoing search for Chief Commercial Officer.
• Petrifilm production: Working to derisk Petrifilm production with team enhancements and expanded project governance, with a gradual transition plan for production.

In the third quarter, the Food Safety segment had revenues of $153 million, with core revenue growth of 1.5% (offset by foreign currency impact). The Animal Safety segment had quarterly revenues of $68 million, with a core revenue decline of 2.6% compared to the prior year. Global Genomics core revenue was down mid-single digits year-over-year. Regionally, Latin America saw double-digit core revenue growth, Asia Pacific was up mid-single digits, Europe was down mid-single digits, and the U.S. and Canada region was also down mid-single digits.

• Update full-year revenue outlook to approximately $895 million, adjusted EBITDA to approximately $195 million, and free cash flow outlook is an outflow of approximately $20 million.
• Update based on third quarter being below expectations and fourth quarter likely not as strong due to soft market backdrop and tariff uncertainty.
• Plan to take further actions to align the cost base with the current revenue level, with the full impact reflected in fiscal 2026.

• Macroeconomic uncertainty: Affects consumer confidence and global trade, impacting end markets.
• Trade tariffs: Uncertain impact on revenue and margins, with dynamic market-by-market effects.
• Government agency spending cuts: Potentially affect the food safety testing environment by pushing testing to plants.

Q: Talk about how much of the lowered guide is from macro specifically.

A: Dave mentioned Q3 was about $6 million below expected, with ~$4 million from uncertainty, $2 million from China, $1 million from genomics timing, and ~$1 million from sample handling. John noted food safety business in U.S. grew 7% but market softened.

Q: Clarify tariff headwinds and what can be done.

A: Tariff impact is market-by-market. China is a dynamic part. Some tariff impacts on bottom line and volume, with efforts to offset through price and competition.

Q: Distributors' inventory commitment globally.

A: Distributors were less willing to commit to inventory globally due to uncertainty around tariffs and other factors, with no strong uptake heading into spring.

Q: Mission-critical objective for the year.

A: Driving critical areas like Petrifilm manufacturing, sample handling growth, and aligning cost structure with revenue level.

Q: Quantify destocking and tariff impacts.

A: Destocking was global with hesitancy, tariff impacts are hard to quantify due to uncertainty, but updated guide reflects consideration of incremental headwinds.

Q: Fiscal '26 outlook.

A: Key levers include revenue growth from focus areas, portfolio actions, and addressing cost alignment, with more details to come in summer.