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NEOGEN CORP (NEOG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue of $221.0M and adjusted EPS of $0.10 missed S&P Global consensus ($224.2M revenue, $0.115 EPS), driven by weaker distributor ordering, FX headwinds, tariffs uncertainty, and lower sample collection volumes .
  • Gross margin was 49.9% (vs. 51.1% YoY), and adjusted EBITDA was $48.5M (22.0% margin), reflecting lower revenue and integration costs .
  • FY2025 guidance cut: revenue now ~$895M (from $905–$925M), adjusted EBITDA ~$195M (from $205–$215M); capex raised to ~$100M; FY free cash flow now expected to be a ~$20M outflow .
  • Strategic/financial catalysts: CEO transition announced, refinancing of term loan and revolver (maturity extended to 2030, 60 bps rate savings), and agreement to sell Cleaners & Disinfectants business for $130M to focus on food safety diagnostics and reduce leverage .

What Went Well and What Went Wrong

What Went Well

  • Food Safety core revenue grew 7% excluding sample collection, with strong pathogen detection performance and Petrifilm/food quality momentum; Latin America delivered double-digit growth; APAC was mid-single-digit positive .
  • Integration progress: sample collection production recovered to prior throughput by quarter-end; Petrifilm facility construction complete with two lines installed; test production on track for fall 2025 .
  • Balance sheet actions: refinancing delivered a 60 bps interest margin reduction and extended maturities, preserving ~$150M liquidity, supporting near-term portfolio divestiture funding and flexibility .

What Went Wrong

  • Q3 revenue and adjusted EPS below expectations due to distributor hesitancy amid macro/trade policy uncertainty; FX was a 310 bps headwind; China softness and genomics wind-down also weighed on results .
  • Gross margin compressed to 49.9% (−120 bps YoY), affected by lower volumes and integration/restructuring costs; adjusted EBITDA margin fell to 22.0% (−100 bps YoY) .
  • FY2025 guidance lowered (revenue/adjusted EBITDA), and free cash flow outlook flipped to a $20M outflow as tariff headwinds ($30M import exposure pre-mitigation, ~⅔ China) and higher capex timing weighed near-term profitability .

Financial Results

Actuals vs prior periods and consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$217.0 $231.3 $221.0
GAAP Diluted EPS ($)$(0.06) $(2.10) $(0.05)
Adjusted EPS ($)$0.07 $0.11 $0.10
Gross Margin (%)48.4% 49.0% 49.9%
Adjusted EBITDA ($USD Millions)$43.7 $51.4 $48.5
Adjusted EBITDA Margin (%)20.1% 22.2% 22.0%

Q3 Actuals vs S&P Global consensus

MetricConsensusActual
Revenue ($USD Millions)$224.2*$221.0
Adjusted/Normalized EPS ($)$0.115*$0.10

Values marked with * retrieved from S&P Global.

Segment revenues and YoY change

Segment Revenue ($USD Millions)Q1 2025Q2 2025Q3 2025
Food Safety$159.3; YoY −4.2% $164.2; YoY −0.1% $152.7; YoY −3.2%
Animal Safety$57.6; YoY −8.1% $67.0; YoY +2.8% $68.2; YoY −4.0%

Selected KPIs

KPIQ1 2025Q2 2025Q3 2025
Cash & Cash Equivalents ($USD Millions)$120.5 $140.2 $127.7
Non-current Debt ($USD Millions)$889.1 $889.9 $890.6
Operating Income ($USD Millions)$2.3 $(457.5) (impairment) $5.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2025$905M–$925M ~$895M Lowered
Adjusted EBITDAFY2025$205M–$215M ~$195M Lowered
Capital ExpendituresFY2025~$85M ~$100M Raised
Free Cash FlowFY2025Positive (on track) Outflow of ~$20M Lowered

Additional context: tariff impact timing expected to begin in Q4 FY2025, incremental EBITDA headwind roughly ~$5M assumed in outlook; total import tariff exposure analyzed at ~$29–$30M before mitigation, ~⅔ China .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Macro/trade & tariffsElevated FX headwinds; regulatory focus rising; Animal Safety at cyclical trough; shipping/distribution costs higher than planned Distributor hesitancy increased; FX −310 bps; China softness; tariff uncertainty heightened post announcements Deteriorating late in Q3
Sample collection productionRamp ongoing; target prior levels by end of Q3; Q1 impact ~$4–$5M, Q2 ~$6M Reached prior throughput by Q3-end; revenue recovery expected over “couple of quarters” Operational recovery; commercial catch-up ahead
Petrifilm manufacturingEquipment arriving; test production targeted for fall 2025 Facility constructed; first two lines installed; test production still targeted fall 2025; duplicate costs expected in FY2026 Execution on plan; cost duplication near-term
Genomics restructuringRightsizing toward large animal (bovine); companion outsourcing declines; mid-single-digit core decline Mid-single-digit core decline; bovine low-single-digit growth; headwind >400 bps to consolidated core; wind-down continues Focus narrowing; revenue attrition persists
RegionsQ2: LatAm double-digit; Europe high-single-digit; APAC slight up; US/Canada roughly flat Q3: LatAm double-digit; APAC mid-single-digit up; Europe mid-single-digit down; US/Canada mid-single-digit down Mixed; US/EU softer
Regulatory/legalRising USDA/FDA focus; Salmonella/Listeria frameworks; internal control material weaknesses noted CEO transition announced; portfolio actions/CF priorities; continued regulatory uncertainty Transition; governance focus
Balance sheet/financingInterest rate swap shift; debt ~$900M; positive FCF targeted Refinanced term loan/revolver; +60 bps savings; liquidity preserved; FCF now ~$20M outflow Improved terms; FCF outlook weaker

Management Commentary

  • “Excluding the sample handling, the food safety business in the U.S. grew 7% for the quarter... when the market started to soften at the end of the quarter, I think that that's what really pulled it down.” — CEO John Adent .
  • “We are updating our full year view... reflect the third quarter being below our expectations and the fourth quarter that will likely not be as strong... given the softening market backdrop and the uncertain impact of tariffs.” — CEO John Adent .
  • “We issued a new $450 million Term Loan A with an upsized $250 million revolving facility... extending the maturity... and realizing 60 basis points of interest rate savings.” — CFO/COO David Naemura .
  • “These [portfolio] actions represent a step towards focusing our business on the highly attractive food safety end market, and are expected to be accretive to margins with net proceeds being prioritized for debt repayment.” — CEO John Adent .

Q&A Highlights

  • Guide reduction drivers: approx $6M shortfall in Q3 vs plan, with ~$4M broad uncertainty, ~$2M China, ~$1M genomics timing, and ~$1M lighter sample handling ramp; tariffs add uncertainty with partial margin and volume impact expected .
  • Tariff quantification/mitigation: ~ $29–$30M import exposure pre-mitigation (about two-thirds China), with pricing actions and localized sourcing to offset; incremental EBITDA headwind roughly ~$5M assumed for Q4 .
  • Sample collection headwind: ~$25M for FY2025; production back to prior rates by Q3-end; multi-quarter commercial recovery needed to rebuild share and clear backlog .
  • Genomics sizing/focus: global genomics ~“$90-ish” entering year; bovine in the “50s” and growing; companion outsourcing declining; continued attrition expected as portfolio is narrowed .
  • FY2026 setup: cost actions to align expense base with revenue; duplicative Petrifilm costs during ramp; portfolio moves expected to improve margin mix and reduce cyclicality .

Estimates Context

  • Q3 FY2025: revenue $221.0M vs S&P Global consensus $224.2M* (miss); normalized EPS $0.10 vs $0.115* (miss) .
  • Q2 FY2025: revenue $231.3M vs $228.1M* (beat); normalized EPS $0.11 vs $0.105* (beat) .

Values marked with * retrieved from S&P Global.

Implications: Near-term Street models likely cut FY revenue/EBITDA and adjust Q4 assumptions for tariffs, FX, and Animal Safety softness; margin trajectories may incorporate duplicate Petrifilm costs starting FY2026 and genomics attrition as portfolio focuses on food safety diagnostics .

Key Takeaways for Investors

  • Q3 miss was principally macro-driven with FX and tariff uncertainty, plus lingering sample collection and genomics headwinds; underlying Food Safety core growth remained solid ex-sample collection (+7%) .
  • Guidance reset lowers FY revenue to ~$895M and adjusted EBITDA to ~$195M, with capex raised to ~$100M and FCF now a ~$20M outflow; watch for tariff pass-through success and distributor behavior in Q4 .
  • Balance sheet flexibility improved via refinancing (term loan & revolver maturity to 2030, 60 bps savings) and expected $130M divestiture proceeds to reduce net leverage by ~0.4x .
  • Strategic focus intensifying: exit/reshape lower-growth, lower-margin Animal Safety components; concentrate on food safety diagnostics where secular/regulatory tailwinds and Neogen’s portfolio depth support share gains .
  • Execution priorities: ramp sample collection commercially to reclaim share; maintain Petrifilm test production timeline (fall 2025) while managing duplicate costs; deliver cost alignment and working capital improvement .
  • Regional lens: LatAm strength contrasts with US/EU softness; monitor China (~2.5% of revenue) for retaliatory tariff impacts and substitution to local supply .
  • Leadership transition underway; expect continued portfolio actions and cost measures; monitor summer updates for FY2026 EBITDA trajectory, tariff mitigation, and Petrifilm ramp progress .

Additional Relevant Press Releases (Q3 timing)

  • CEO Transition announced (April 9, 2025): Board initiated CEO search; focus remains on executing strategic and portfolio priorities .
  • Term Loan/Revolver Refinancing (April 7, 2025): maturity extended to April 2030; 60 bps interest savings; revolver upsized to $250M with initial $100M draw .
  • Sale of Cleaners & Disinfectants Business (April 21, 2025): $130M cash plus contingent consideration; expected to reduce net leverage by ~0.4x and be margin accretive; close expected in Q1 FY2026 .