Q4 2025 Neogen Corp Earnings Call
Operator: 4th Quarter FY 2025 Earnings Call. At this time, all lines are in a listen-only mode.
Good morning, ladies and gentlemen. Welcome to Nia Jen Corporation's fourth quarter FY 2025 earnings call.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.
Operator: This call is being recorded on Tuesday, July 29, 2025.
Bill Waelke: I would now like to turn the conference over to Bill Waelke. Please go ahead.
Bill Waelke: 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 gap and forward looking language.
Being recorded on Tuesday, July 29th, 2025, I would now like to turn the conference over to Bill Waelke. Please go ahead.
Thank you for joining us this morning for the discussion of the fourth quarter of our 2025 fiscal year.
Bill Waelke: Before passing the call over to our CEO, John Adent, who will be followed by our CFO and COO, Dave Naemura. 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.
I'll briefly cover the non-gaap and forward-looking language before. Passing the call over to our CEO. John Aiden who will be followed by our CFO and coo, Dave number
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.
Bill Waelke: 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-K and in other filings we make with the FCC. We disclaim any obligation to update these forward-looking statements.
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 2, which provides a reminder that our remarks will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
These four 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-K and in other filings we make with the FCC.
Bill Waelke: I'll now turn things over to John. Thanks, Bill.
We disclaim any obligation to update these 4 looking statements. I'll now turn things over to John.
John Adent: Good morning, everyone, and welcome to the earnings call for the fourth quarter of our 2025 fiscal year.
Thanks Bill.
John Adent: You may have seen the 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.
Good morning, everyone, and welcome to the earnings call for the fourth quarter of our 2025 fiscal year.
You may have seen the press release issued last week. Announcing the board as 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.
John Adent: 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 of 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.
And will 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 in market conditions that we saw worsen over the course of the third quarter, continued into the fourth quarter, particularly in food, safety.
For consumers, continuing to be under pressure from the cumulative inflation of the last 4 years. We estimate that many food. Producers are still experiencing year-over-year, declines and their production volumes. But many of them, not expecting this trend to meaningfully reverse in the near future.
John Adent: 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.
Our view is that the food safety and Market is still able to grow in this environment but certainly not at the mid to high single digit levels. We believe it is historically seen.
As it relates to the regulatory environment in the US specifically, there have been Cuts made of 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 and milk.
The emergency response network focused on bioterrorism in certain local food assistance programs.
John Adent: 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 2025 research priority. 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 tenets 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 percent and uses the Neogen Molecular Detection System, or MDS, as its primary method.
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 2 weeks, the USDA food safety and inspection service or fsis an officer food safety policy plan and separately, their fiscal 2025 research priorities.
The key tenets 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 Mysteria 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 from listeria by over 200%.
John Adent: 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.
And uses the NeoGen Molecular Detection System, or MDS, as its primary method.
It is also performing more robust in-person food safety assessments, and an increasing rate with the intent of proactively identifying and addressing potential food safety concerns, with a priority placed on ready-to-eat meat and poultry facilities.
John Adent: Another key tenet of the USDA plan is charging ahead to reduce salmonella illness. 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 the practical complications of implementing the framework as proposed and not due to any lack of commitment by the USDA to address salmonella illness. The agency has said they are convening discussions with key stakeholders on 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.
In 2025, the number of these assessments conducted is up by over 50% to date.
Another key tenant of the USDA plan is charging ahead to reduce salmonella illnesses.
Chicken encompasses all poultry products.
This appears to have been done mainly due to the 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 and the development of a new Common Sense strategy to address salmonella.
John Adent: A few days after the food safety policy plan was announced, FSIS released the research priorities for fiscal 2025, in which the prevention, detection, and analysis of pathogens, particularly Salmonella and Campylobacter, 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.
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 a research priorities document for fiscal 2025, in which the prevention, detection, and analysis of pathogens, particularly Salmonella and Campylobacter, were prominent studies.
While responsibility for food safety ultimately lies with the producers, we are not dependent on regulatory action to drive growth. It is certainly a positive to see this prioritization of food safety in the administration.
John Adent: On the topic of the enhanced focus on microbiological testing, just yesterday we announced the launch of our Mysterio Right Now for use on our MDS platform for pathogenesis. 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. Pathogen detection market is one of our top priorities, and we're 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.
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 1 robust platform for the fast detection of environmental pathogens and up to 96 samples per cycle.
Pathogen detection Market is 1 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.
John Adent: 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 in a 70-year low. Inventory levels on 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.
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 businesses focused has declined for several years and is currently at a 70 year low
Inventory levels of the channel remain largely stable, but the veterinary distributors and agri-trailers through which we go to market seem to be taking a cautious approach given the broader market uncertainty.
John Adent: Strong core growth in the bovine business was offset by expected declines in companion animal and other markets.
For our genomics business, total fourth quarter core revenue growth improved sequentially and was down low single digits on a year-over-year basis.
John Adent: 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.
Strong core growth in the bovine business was offset by expected declines in companion animals 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
John Adent: trade partners still underway. Our most recent communication on tariffs was that we expected a $5 million 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 million on an annualized basis, given the status of surcharges, competitor action, and the impact of the pandemic. 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.
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 million dollar 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 million on an annualized basis, given the status of search charges, competitor actions, and the timing of certain resources and opportunities.
We expect the trade environment to remain Dynamic, the plan to continue to take actions to mitigate our exposure.
John Adent: Our new PQ film facility continues to progress well, but our expectation remains that initial testing production will begin in a few months. Once feature film 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 rate. 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 suggests that petrofilm 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 partners.
Our new future from facility continues to progress well, but our expectation remains that initial testing production will begin in a few months.
Once Future Film Production is fully up and running. Our intent is to move some additional product lines that we have in Lancing into the new facility.
Which will affect overhead absorption rates.
We've been able to complete this detailed overhead and analysis, and also refine our buildup of the bill of material and labor costs with the most current information available.
This work is validated at a previous estimate and suggests future film gross margins in our facility. Once fully running, we'll be slightly better than what we see today on sales in these products made by our transition manufacturing partner.
John Adent: Teacher 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 de-risked 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 around 50% in the overall product category, although it remained lower than prior year level. The challenge with achieving these higher rates is that we were very inefficient in doing so.
The Teacher film is clearly an important product line for the company.
A 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 the sequential Revenue Improvement around 50% in the overall product category, although it remained lower than prior year levels,
John Adent: The production equipment is of an advanced age, and we continue to struggle with sustaining consistent uptime of the automated process. 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 back orders 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.
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 back orders and, hopefully, a more normalized production rate.
Combined with our engineering efforts will allow productivity to improve in the coming quarters.
John Adent: 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, and educational system. 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 and attract event markets.
Given the software 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 in our prior earnings call, we are undertaking actions to accelerate the building of a more profitable focused in the agent.
David Naemura: 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. Thank you, John, and welcome to everyone on the call. Jumping into the results, our fourth quarter revenues were $225 million. Core revenue, which excludes the impact of foreign currency, acquisitions, and discontinued product lines, was down 290 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 million in the quarter, down 3% compared to the prior year, including a core revenue decline of $1.3%.
We believe that rigorously managing these discrete items with a focus on improved execution. We'll maximize the company's ability to take full advantage of its position and attractive in 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.
Thank you, John. And welcome to everyone on the call today. Jumping into the results, our fourth quarter revenues were $225 million. Core revenue, which excludes the impact of foreign currency, acquisitions, and discontinued product lines, was down 290 basis points for the quarter, while foreign currency and discontinued products were a headwind of 190 basis points compared to the prior year.
David Naemura: We saw growth in biosecurity products, as well as in the bacterial and general sanitation product category, which benefited from strong growth and pathogen detection products. In the Indicator 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 million, which includes a core revenue decline of 6.7% compared to the prior year quarter.
At the segment level, revenues in our food safety segments were $162 million in the quarter, down 3% compared to the prior year, including a core revenue decline of 1.3%.
We saw growth in BIO security products, as well as in the bacterial. And general sanitation product category, which benefited from strong growth and pathogen detection products in the indicative, testing culture media and other product categories. Solid new product growth in our food. Quality product line was offset by the decline in Sample collection as well as declining Petri film, that was mostly compared 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.
David Naemura: 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. Excluding genomics, the animal safety segment has had core revenue growth at a compound annual rate of three and a half percent 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 most single digits in Q4, reflecting a sequential improvement and benefits from refocusing the business on more attractive and market opportunities.
quarterly revenues in the animal safety segment for 64 million, 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 and a half percent over the last 4 fiscal years. This is below the typical through the cycle growth rate, but about what we would expect, but 3 of those 4 years representing periods of weakening market conditions,
Genomics: Core revenue declined in low single digits in Q4, reflecting a sequential improvement and benefits from refocusing the business on more attractive market opportunities.
David Naemura: From a regional perspective, poor 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 petri film, 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 and 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.
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 Peak refilm 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 and 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.
David Naemura: 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 decline in the animal safety segment. Gross margin in the fourth quarter was 41.2 percent, which was primarily impacted by lower volume, elevated inventory write-offs, sample collection production inefficiencies, and some tariff imbalances. 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 2026.
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 films, which faced a very difficult comparison against the prior year quarter.
Growth in our food, quality allergen and pathogen product categories was partially offset by the clients and most other major food. Safety product categories, as well as decline 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, and efficiencies, and some tariff impact.
David Naemura: For sample collection, we've discussed that as part of the integration of the 3M 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 inefficiency. 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.
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 2026.
For sample collection, we've discussed that. As part of the integration of the 3M business, we relocated this production to an agent facility and have been operating with a very high level of inefficiency.
We noted that revenue and Q4 although still down year-over-year represented a significant sequential improvement from Q3 but was achieved with significant inefficiencies.
David Naemura: 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 quarter. Adjusted EBITDA was $41 million 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 startup costs but rather run rate inefficiencies. The elevated inventory write-offs negatively impacted adjusted EBITDA margin by a few hundred basis points compared to what we had anticipated.
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 a clear line of sight. Consistent performance at higher output levels will likely be a gradual progression over the coming quarters.
David Naemura: 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 act. Fourth quarter adjusted net income and adjusted earnings per share were $11,005,000 respectively, compared to $22,010,000 in the prior year quarter, due primarily to the lower adjusted EBITDA, which more than offset the lower interest expense and effective tax rate.
Adjusted IBA was 41 million in the quarter representing a margin of 18%, in addition to lower volume, the adjusted ibaon margin was negatively impacted by the previously covered inventory, write-offs, tariffs, and Sample collection. And efficiencies, a portion of which were not considered startup costs, but rather run rate in affic, the elevated inventory, write-offs, negatively impacted adjusted, Eva Dom margin by a few hundred basis points. Compared to what we had anticipated. The Tariff impact was driven by some purchases that were in route, particularly, from China. Prior to the current pause going into effect and subject to the higher rates. And there was also some time leg in the implementation of our offsetting actions.
David Naemura: During the fourth quarter, in connection with our annual goodwill valuation assessment, we further impaired the carrying value of goodwill primarily associated with the 3M 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 US GAAP was warranted and recorded an additional $598 million non-cash charge. Moving to the balance sheet, we ended the quarter with gross debt of $900 million, 61% of which is at a fixed rate, and a total cash position of $129 million.
Fourth quarter adjusted net income and adjusted earnings per share were $11 million and $0.05, respectively, compared to $22 million and $0.10 in the prior year quarter. This decline was primarily due to the lower adjusted EVA, 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 3M Food Safety Division acquisition, as we have seen market conditions weaken. There have been 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 million non-cash charge.
David Naemura: Just under two weeks ago, we completed the divestiture of our cleaners and disinfectants business, which resulted in approximately $115 million in net proceeds that will be used to pay down $100 million of debt in Q1. On a pro forma basis, this would reduce our net leverage by .4 terms. Pre-cash flow in Q4 was roughly break-even, representing an improvement of $14 million compared to Q3, but lower than we had anticipated due to lower EBITDA, some pull-forward of CapEx from fiscal 2026, and the timing of certain international cash tax. Total capital expenditures declined to $16 million in Q4, a trend we expect to continue with substantially lower capex in fiscal 2026 compared to fiscal 2025.
Moving to the balance sheet, we ended the quarter with growth debt of $900 million, 61% of which is at a fixed rate, and a total cash position of $129 million just under 2 weeks ago. We completed the divestiture of our cleaners and disinfectants business, which resulted in approximately $115 million in net proceeds that will be used to pay down $100 million of debt in Q1.
On a pro forma basis, this would reduce our net leverage by approximately 0.4 turns.
Free cash flow for Q4 was roughly break-even, representing an improvement of $14 million compared to Q3, but lower than we had anticipated due to lower EVA, some pull-forward of capex from fiscal 2026, and the timing of certain international cash taxes.
David Naemura: 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 26. 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' import-export planning, as well as distributors' purchase-to-city Taking these factors into account, our current expectation is for revenue to be between $820 and $840 million, which excludes 10.5 months of annualized revenue from our cleaners and disinfectants business, which was in the low $60 million in fiscal 2025.
Total Capital expenditures declined to 16 million. In Q4 a trend, we expect to continue with substantially lower capex in fiscal 2026, compared to fiscal 2025
David Naemura: Our current view is that revenue in the second half of fiscal 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 million to $175 million, which similarly excludes ten and a half months of an annualized EBITDA impact of approximately $11 million from cleaners and disinfectants. Compared to fiscal 2025, we are planning for gross margin at fiscal 2026 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 current view is that Revenue in the second half of fiscal 2026 will be higher than in the first half. Due in part to the normal seasonality of the business,
Regarding adjusted. Eva our current expectation is a range of 165 million, to 175 million, which, similarly, excludes 10, and a half months of an annualized. Eva impact of approximately 11 million from cleaners and disinfectants,
David Naemura: 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 year 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 million, we expect free cash flow in fiscal 2026 will be positive.
Compared to fiscal 2025. We are planning for gross margin and fiscal 2026 to include a Tailwind from lower inventory. Right offs and headwinds from sample collection and tariffs which will flow through to impact adjusted ebit. Talk
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 EBIT margins in the second half of the year 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 million, we expect free cash flow in fiscal, 2026 will be positive.
David Naemura: 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-K.
John Adent: I'll now hand the call back to John for some final 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 3M food safety business. While we've 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.
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-K.
I'll now hand the call back to John for some final thoughts.
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 3M Food Safety business.
While we've made significant progress, the integration has been complex, and we've had some execution shortfalls.
which have been exacerbated by the soft and market conditions, foreign currency headwinds and more recently, the global trade in environment
John Adent: As it relates to inventory, we're 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 and 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 are taking clear steps to address the sample collection production challenges and, in parallel, implementing pricing actions to improve profitability.
As it relates to inventory. We are implementing more robust planning, and coordination across the key organizational functions and expect to see a decrease in 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 and 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.
John Adent: We have a long history as a trusted food safety partner and source of expertise for our customers resulting from our over 40 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.
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 40 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.
John Adent: I'd like to once again thank the Neogen team for their dedication and perseverance throughout my tenure at the company. We face 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 would like to once again thank the Neogen team for their dedication and perseverance throughout my tenure at the company.
We faced and overcome real challenges, and the team is entirely focused on the road ahead and executing our Improvement plan with precision.
Operator: I'll now turn things over to the operator to begin the Q&A. Thank you.
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&A.
Operator: Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star followed by the number 1 on your cell phone keypad. Apologies, and if you would like to withdraw your question, please press star 2.
Thank you, ladies and gentlemen, we will now begin the question and answer session.
Can I ask a question? You may press the star, followed by the number 1 on your cell phone keypad.
Subhalaxmi Nambi: With that, our first question comes from the line of Subu Nambi with Guggenheim. Please go ahead. Hey guys, good morning. Thank you for taking my question.
Apologies. And if you would like to draw your question, please press the star to with that. Our first question comes from the line of Cebu nambi with Google. Hi, please go ahead.
Subhalaxmi Nambi: At this time with Mike as 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? Yeah.
Hey guys. Good morning. Thank you for taking my question. Um at this time, with Mike, as 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
David Naemura: Hey, Subhu. Good morning. Look, I think at the end of the day, we still have a position here that we want to 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 going forward here like we usually would and don't think we've put Mike in a position here where where we, you know, signed him up for something that's out of the ordinary for him. I guess I would characterize a little more as business as usual. And then, David, along those lines, you articulated some of the assumptions here, recognizing that you limited the tariff impact to $10 million annualized after supply actions.
Yeah, hey subu, good morning. Um, look, I think at the end of the day, we still have a position here that we want to give people color as to where the year's going. Uh, we tried to take into account that there would be a change. But, uh,
You know, I think we're operating forward here like we usually would, and I 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 Force. So it's, I guess I would characterize a little more business as usual.
David Naemura: How much of a headwind is built for next year? I'm sorry, can you repeat that part again about the 10 million? Well, I didn't quite catch the question, Subha. The tariff impact that you have sized it to 10 million annualized after the issues, how much of a headwind is built in for next year? Yeah, 10 million is... is the headwind for fiscal 26 that we're trying to communicate. I see. And we increased that from our previous. OK. Suman, does that make sense? Did I answer your question? Yes, David. Yes, yes.
Recognizing that you're limited to tariff impact to 10 million annualized, after Supply actions. How much of a headwind is built for next year?
I'm I'm sorry. Can you repeat that part again about the 10 million? What? I didn't quite catch the question, zooboo the Tariff impact that you have uh, sized it to 10 million annualized after
the issues. How much of a headwind is built-in for next year?
yeah, 10 million is
Is, is the headwind for fiscal 26? That we're trying to communicate.
I see I see from our previous.
Okay.
Subhalaxmi Nambi: And then I have two questions. Real quick, I'll be 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? Yeah, look, I think what you see is 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.
So, would I do that? Does that make sense? Did I answer your question? Yes, David, yes, yes. And then I have two questions real quick. I'll, um, recognizing there are others on the line, um, we've seen some of the major food brands continue to emphasize that the consumer backdrop is under pressure, 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?
David Naemura: 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.
John Adent: So, I think also, and I'm going to 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? Yeah, thanks, Dave. Yeah. So, so I think a way to help us continue to help us outgrow the market is to use the tailwind of the regulatory. As we talked about, we saw that testing at FDA was up, or USDA was up almost 200, or FSIS was up 200% increase in listeria on a pace, because the administration is really focusing on pathogen, whether that's listeria or salmonella.
Yeah, look, I think what you see is 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. Um, the sample collection here for us is an opportunity to drive additional volumes but we're being cautious about that. Give them the inefficiencies that we've experienced. Um, so I I think also and I'm going to turn over to John because we
John Adent: And we would think we're really well aligned for that. Regarding salmonella, you know, we're working kind of with the National Chicken Council, Meat Institute, and FSIS to kind of develop a program. And we think that our MDS, quant, salmonella, and serotyping kits are really going to provide the data that is going to help them develop a robust program for this protein industry. So, you know, working with those constituents is going to help us continue to grow.
You think there's a regulatory backdrop in our portfolio that that provides us a nice opportunity, John, can you speak to that? Yeah, thanks Dave, yeah, so so I think a way to help us continue to help us outgrow. The market is to use the Tailwind 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 is up. 200% increase in listeria on a pace because the indust the, the administration is really focusing on pathogen whether that's listeria or salmonella. Um, and we think we're really well aligned for that regarding salmonella, you know, we're working kind of with the national chicken, Council of meat Institute and fsis to kind of develop a program. And we think that our MDS, Quant salmonella and serotyping kits, are really going to provide the data that is going to help them develop a robust program for this protein industry. So you know, working with those constituents is going to help us continue to grow.
Subhalaxmi Nambi: Thank you for that, David and John.
Subhalaxmi Nambi: And one last one real quick. What are you pointing investors to in terms of clear KPIs in regards to Petrifilms, Q numbers, transition, CAPEX targets, or just other beyond just timing of these projects? I know you said Q4 is going to be the largest impact in terms of duplication costs, but anything else that you would point out when it comes to Petrifilm transitions? Yeah, thanks, Subhu. Clearly, we have a large reduction in capital expenditures year over year, and we're going to need, we'll stay within that envelope. As we move into the transition period here, we've talked about starting test production.
Um, thank you for that. Uh, David and John, and one last one real quick. Um,
What are you pointing investors to in terms of clear kpis in regards to Petri films, SKU numbers, transition capex, targets, or just others Beyond just timing of these projects. I know you said 2 4 is going to be the largest impact in terms of duplication cost. But anything else that you would point out when it comes to patrol transition,
Subhalaxmi Nambi: 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 will 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 standup. Thank you. Thank you, Subha.
Yeah. Thanks subu. Um, clearly we have a large reduction in capital expenditures year-over-year and we're going to 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. Uh, there are 17 Skuse of Petri film. That'll stand up over, you know, 4 or 5 quarters after we start test production. And um, that'll be an important Milestone that we that we take people through. Um so I think more to come here in a quarter. As we as we work towards stand up.
Thank you face.
Thank you, sugu.
Brandon Vazquez: And your next question comes from the line of Brandon Vazquez with William Blair. Please go ahead. 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. 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 you think might be causing it getting worse, if I'm understanding that correctly. And then maybe just talk about, 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.
And your next question comes from the line of Brandon Vasquez with William Blair. Please go ahead.
Brandon Vazquez: Where do you guys expect that to be over the next four quarters? What are you assuming within the guidance?
Hey, good morning everyone. Thanks for taking the questions. The first 1. I just wanted to focus a little bit on the macro side first and clarify, it sounds like correct me if I'm wrong or things getting incrementally, worse on a sequential basis on the macro front. Um, anywhere that you can point to what what you think might be causing it getting worse. If I'm understanding that correctly. Um, 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 uh, over the next 4 quart?
Orders. What do you assuming within the guidance?
David Naemura: Yeah, Brandon, hey, it's... It's a good question. So I think what we saw, kind of rewinding a little bit, is as 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 Q3 to Q4. And then, of course, we pay close attention to what some of our larger, broader customers are saying.
David Naemura: So we think the environment remains soft. And we're going to need to see some recovery in the macro for the consumer to get back to buying more volume. 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 rewound a year, we felt that was, you know, mid-single, it might be lower than that now. It's difficult to tell. We think, other than our sample collection, issues. We grew low single in the fourth on our food safety testing side.
That decreased sequentially Q3 to Q4. 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 going to see some. We're going to need to see some recovery in the macro, uh, for the consumer to get back to buying more volumes.
As it relates to food. Safety industry growth. Uh yes we believe food safety, testing grows, even when production is negative but we think it grows at a lower rate. Uh I think if we rewound a year we felt that was you know mid single. It's it might be lower than that. Now it's it's typical to tell um, we think other than our sample collection
Issues. We grew low single in, in the fourth, on our food safety testing side.
David Naemura: And we've really, for the year, assumed this kind of environment that we've exited the year is what we're kind of carrying through the year, 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 uncertainties, We've we've kind of planned an environment not too dissimilar than what we've here in the second half. Okay. And just to clarify, Dave, on what you just said there, it sounds like 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-digit clip.
um,
And and and we really for the year assume this kind of environment that we've exited the year is what we're kind of 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, we've kind of planned an environment not too dissimilar than what we experienced here in the second half of the year.
Okay, and just to clarify, Dave, on what you just said there. It sounds like...
David Naemura: 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? Yes, Brandon, directionally, I think that's right. I mean, if we step back and look for the full year, it would be 5%. So we think, you know, we're in that.
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?
David Naemura: OK, 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? When does the inventory management level off? Sorry, not the inventory management, but the inventory write-offs, when do those level off?
Yep, Brandon directionally. I think, that's right. I mean, if we step back and look for the full year, it would be 5%. So we think, you know, we're, we're in that zone.
okay, and then
um,
they maybe you can spend a minute just talking a little bit also about obvious like is there any kind of sequential
David Naemura: Help us think about how we should be modeling the sequentials of margins through the year.
Guidance, you can give us whether it's uh, 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 does when do the tariffs really roll through inventory and meaningfully start impacting you? Um, when, um, when does some of the Opex of the disinfectants business kind of roll off? Uh, anything else in terms, when does the inventory management level of 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 sequential of margins through the year.
David Naemura: Okay, so we usually start the year with Q1 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 point to some of the challenges we saw in the fourth and see some pretty clear path to doing better this year, but we will get a full year of sample handling, which is very inefficient.
Okay.
So we usually start the year with q1 as our lowest.
Quarter.
Um, 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.
David Naemura: We have a path to doing better there, but it's going to take a few quarters at least here, so I think we'll see gradual improvement as well. I think all 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? Yep, it does.
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. Um we we have a path to doing better there but it's going to take a few Quarters at least here so I think we'll see gradual Improvement as well. I think all 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 um, we've taken cleaners and disinfectants out of the business and that tended to drive a little bit of the seasonality and lumpiness.
Uh, does that help directionally Brandon?
David Naemura: 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 forma margins will be, is essentially how much 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?
Yep, it does. And I'll just ask 1 last 1 and let someone else hop in here. But as we think about, obviously you have the disinfectants that you've already announced as a destitute will have genomics updates. Uh, later in the year,
David Naemura: Will they take a couple of quarters? Any color around that would be helpful too. And I'll let someone else hop in. Thanks, 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 related costs are direct costs that go directly with the business. There tends to be, you know, a million and a half to two million 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 this business, and then we'll see some reductions.
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 forma 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 let's have someone else hop in. Thanks, guys.
Yeah. Um, so as we sell the businesses, the majority of the
David Naemura: 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 question.
Under TSA arrangement for a period of time. It probably at least a full year here, uh, in the case of of this business and then we'll see some reductions but again that maybe 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.
John: And your next question comes from the line of David Westenberg with Piper Sandler. Please go ahead. Hi, this is John, on for Dave. Thanks for taking the question.
And your next question.
Line of David westenberg with 5% lower, please go ahead.
John: 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? 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 we'll get into it.
first off, could you uh give any commentary like any thoughts on uh the key differences in the management styles between
Uh, Mike and John have any, uh, different priorities and...
Uh, what we should, uh, be looking out for going forward.
David Naemura: And I think as we do that, he'll be looking forward to kind of meeting, meeting you guys and sharing some of his philosophy in the coming quarter. 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 26? And can you give me thoughts on demand in the different species and use cases for it? Yeah, look, if you if you recall, back in mid year fiscal 25, we talked about a restructuring of that business, trying to refocus it on more attractive cattle and market where we think we're more highly differentiated.
Yeah, look um, you know fair question. But again let's remember Mike hasn't started yet and so um you know I think I think we'll see you know, getting to know Mike a little bit. Um, you know, I think very much of Back to Basics guy but um you know he he 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, um he he'll be looking forward to kind of meeting meeting you guys and sharing some of his philosophy in the coming quarters.
Got it. Thank you. And uh, you mentioned that genomics sequential Improvement, particularly in bovine, do you see that that business overall is stabilizing for fiscal 26? And can you give me thoughts on demand in the different, uh, species in a use cases for it?
yeah, look, if you, if you recall back in mid-year fiscal, 25 we talked about
David Naemura: And with that, we brought down some of the second half revenue associated with, you know. I'd say the top line for genomics will be a little less in fiscal 26 as compared to fiscal 25. 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 market. All right, great. Thank you. I'll jump back into queue. Thank you. And once again, if you would like to ask a question, please press star 1 on your telephone keypad.
A a restructuring of that business trying to refocus it on more attractive, uh, cattle and Market, where we think we're more, highly differentiated. And with that, we brought down some of the second half Revenue associated with genomics. Um, I'd say the top line for genomics will be a, a little less in, in fiscal 26 as compared to fiscal 25. Um,
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 Catalan markets.
All right. Great, thank you. I'll jump back in the queue.
Thank you.
Thomas DeBourcy: Your next question comes from the line of Thomas DeBourcy with Nephron Research. Please go ahead.
And once again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from the line of Thomas divorcee with nephron research. Please go ahead.
Thomas DeBourcy: Can't hear you, Tom, if you're talking. Operator, you might have a problem with Tom. Hi, can you hear me now? Thank you, Tom. Hi, sorry about that.
Can't hear you Tom. If you're talking
Operator might have a problem with Tom's line.
Hi, can you hear me now?
Yes, I can. Okay.
John Adent: So, just on the food safety segment, in terms of the strengths that you've seen, you know, I guess, in the food quality pathogen product lines, would you say that, you know, you've seen some market share gain or, you know, addressing additional kind of unmet need? What has really driven, I guess, the strengths in, I guess, pathogens most specifically? Sure, Tom, I can start with that, I think. Look, we know that pathogens have been a priority for us. We've stated that pathogens have been a priority. And part of that is some of the new launches we've done, right?
Hi, uh, sorry about that. Uh, so, um, just at the food safety segment, um, in terms of the strength that you've seen, um, you know, I guess, uh, in the food quality pathogen product lines, um, would you say that? Um, you know, you've seen some market share gain or um, you know, addressing additional kind of unmet need, what is really driven? I guess the the strikes um in in I guess in pathogen most specifically
Sure, Tom, I can I can start with that, I think.
John Adent: 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're continuing to invest in the pathogen space. And with those investments, we're seeing that we're able to meet some of the needs where we didn't have the product portfolio before that we do now.
John Adent: So we see that as a great opportunity for us to continue to drive growth in that pathogen space.
But we know that uh pathogens have been a priority for us. We we've stated that the 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. Um, Quantum ml tests 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. Then with those uh Investments we're seeing 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 passage in space.
David Naemura: And just one other question on CABX. For 2026, I think you mentioned 50 million, actually, so A little bit lower than I was expecting. So just is part of the divestiture hoping, 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. It's, I think, a 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 few million as well.
Got it and uh, just 1 other question, I'd capex. Um, for 2026. I think you budgeted 50 million actually, to a little bit lower than I was expecting. So just, uh, is part of the domestic. You're hoping, um, you know, or you know, with this kind of midline with, you know, maybe expected uh, capex step down, um, you know, over the kind of years since, uh, the merger.
David Naemura: And look, we're prioritizing the plant and getting that work done, as you know. So, you know, what I think you see us here doing is also just kind of focusing on our CapEx on the priority. So, you know, it's a pretty good step down for us. as you point out. Thank you. Thanks, Tom.
Is down. Uh, you know, a few million is 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 our capex on the priority and
Um, so, you know, it's a pretty good step down for us.
As you point out, thank you.
Thanks Tom.
Operator: And we have no further questions at this time.
John Adent: I would like to turn it back to John Adent for closing remarks. Thank you. Thank you all for joining us. We look forward to I look forward to helping drive a smooth transition to Mike. We talked about, I will be here through the end of October and working with him and really see great opportunities for Neogen in the future and excited to watch the growth of this company. So thank you very much.
And we have no further questions at this time. I would like to turn it back to John Eden for closing remarks.
Thank you, thank you all for joining us. Um, we look forward to uh,
Helping Drive. I look forward to helping drive a smooth transition to Mike, we talked about, um, I will be here through the end of October and working with him and and really see great opportunities for me again in the future and excited to watch the growth of this company. So thank you very much.
Operator: Thank you, presenters.
Operator: And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect. Music
Thank you for presenters. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining me now. Disconnect