Neogen Corporation Q3 FY2026 earnings call

• Food safety segment had solid core growth, adjusted EBITDA margins at 22.8% through cost discipline. - Animal safety business affected by supplier challenges, implemented more rigorous supplier qualification and review process. - Three strategic initiatives: Commercial prowess - strengthening sales and marketing engine, introducing global solutions-based selling model, adding leaders to review go-to-market strategy. High-impact innovation - chief scientific officer leading assessment of portfolio, investing in research scale R&D line for petrofilm. Operational efficiency - on schedule for manufacturing transition, making progress in inventory management and supply chain, fiscal 2027 budgeting and forecasting underway.

Food safety segment: Third quarter revenue of $156.7 million, 4% core growth. Led by indicator testing and culture media products up 11%, pathogen test kits growth. Animal safety segment: Quarterly revenue $54.5 million, core revenue down 8.7% due to supplier disruptions. U.S. revenue 48% of total sales, international 52%. Food safety grew in U.S. third quarter. Gross margin 46.9%, adjusted gross margin 51.7%. Adjusted EBITDA $48.2 million, margin 22.8%.

• Raised full-year fiscal 2026 revenue guidance to $857 - $860 million. - Anticipate continued impact from animal safety supply challenges and FX headwind. - Maintain adjusted EBITDA guidance of $175 million for fiscal year 2026. - Revenue exposure to conflict zone countries immaterial. - Freight and transportation cost increases impact, but manageable. - Expect free cash flow to improve next year.

• Supplier challenges in animal safety business related to product documentation, raw material shortages, supplier manufacturing site transitions and global tariff changes. - Potential impact of higher energy and oil prices on plastic components, but manageable with inventory and pricing actions. - FX environment changing from tailwind to headwind affecting reported growth rates.

Q: Cleanup questions on sample handling and animal safety supplier issues.

A: Sample handling expected to improve sequentially, focus on addressing supplier issues like instrument supplier transitioning, global vitamin A shortage, sodium bicarb production transition.

Q: On go-to-market strategy evaluation.

A: Identifying markets with significant opportunity, evaluating presence, reallocating resources.

Q: On adjusted gross margin and genomics sale.

A: Adjusted gross margin performance, genomics sale having creative and positive impact, focusing on portfolio rationalization.

Q: On Q4 profitability and margin expansion.

A: Q4 impacted by 1 million credit, freight step up, merit impact, incremental lead team costs; margin expansion opportunities in purchase price variance, inventory reduction.