Neogen (NASDAQ:NEOG) executives highlighted steady performance in the company’s food safety business and improving profitability during its fiscal third quarter 2026 earnings call, while acknowledging that supplier-related disruptions weighed heavily on results in animal safety. Management also provided updates on the company’s ongoing Petrifilm manufacturing transition, transformation initiatives, and the planned divestiture of its genomics unit.
Food safety growth offsets animal safety supply disruptions
CEO Mike Nassif said the company delivered “solid core growth” again in food safety, including continued growth in the U.S., and described the quarter’s performance as consistent with current market dynamics. CFO Bryan Riggsbee reported total third-quarter revenue of $211.2 million, representing a 0.1% increase on a core basis.
Animal safety revenue was $54.5 million, with core revenue down 8.7% year over year. Nassif said the shortfall was driven by supply-side issues rather than demand, and Riggsbee added that excluding the disruptions, animal safety would have been more consistent with the second quarter’s year-over-year growth profile.
Margin improvement and cost control drive profitability
Nassif said Neogen improved adjusted EBITDA margins “to some of the highest levels in recent company history” through cost discipline. Riggsbee reported adjusted EBITDA of $48.2 million, representing a margin of 22.8%. He said that was an improvement of nearly 110 basis points sequentially despite lower revenue, driven by a decline in adjusted operating expenses that were down 9% from second-quarter levels.
Riggsbee noted that approximately $1 million of the sequential operating expense decline was due to “non-recurring credits” that will not repeat.
Gross margin in the quarter was 46.9%, and adjusted gross margin was 51.7%. Riggsbee said gross margins, excluding one-time costs, were essentially flat year over year. He also said the company made less progress than planned on sample collection margin improvement, and sample collection “still generated a negative gross margin” due to higher scrap rates tied to a quality issue at a third-party supplier, which he said has been addressed.
Adjusted net income was $19.4 million and adjusted earnings per share were $0.09, Riggsbee said.
Petrifilm transition on schedule; innovation focus expands applications
Nassif reiterated that the Petrifilm manufacturing transition remains on track for November 2026, correcting a slide-deck typo raised during Q&A. He said Neogen has now completed full validation of 100% of the production equipment used in the Petrifilm manufacturing process and has begun validating its current 17 SKUs, starting with the highest-volume and most technically challenging products.
He said Neogen is investing in a research-scale R&D line at its Minnesota research facility in the fourth quarter of fiscal 2026 to prototype, test, and validate new Petrifilm SKUs without disrupting commercial production. Nassif said the company believes Petrifilm’s applications extend beyond traditional food and beverage testing into categories such as pharmaceuticals, cosmetics, and nutraceuticals, and that bringing manufacturing in-house will allow it to qualify and validate custom SKUs that were not feasible previously.
Riggsbee said the research line is “not a major investment” and will be included in fiscal 2026 capital spending, while the company expects total CapEx to step down in fiscal 2027 after completing larger Petrifilm-related projects. He also tied that CapEx step-down and improving profitability to expectations for stronger free cash flow next year.
Supplier disruptions in animal safety prompt tighter controls
Nassif said the company experienced “several supplier challenges stemming from third-party manufacturers” that had a “meaningful impact” on animal safety results. He outlined a more rigorous supplier qualification and review process intended to improve reliability.
During Q&A, Nassif identified three supplier issues affecting animal safety:
- A key instrument supplier transitioning manufacturing locations to reduce tariff impact, with “startup challenges.”
- The global vitamin A shortage, which has constrained inputs for several products.
- A sodium bicarbonate partner transitioning production and encountering issues.
Nassif said Neogen has strengthened supplier management and forecasting processes, and that while the company was “surprised by some of these supplier challenges” in the third quarter, it does not expect to repeat those surprises in the fourth quarter. However, he said the challenges are expected to continue into Q4, and the company built that uncertainty into its guidance.
Guidance updated; divestiture and macro factors in focus
Riggsbee said Neogen is raising full-year fiscal 2026 revenue guidance to $857 million to $860 million to reflect stronger-than-expected third-quarter results, while maintaining adjusted EBITDA guidance of $175 million.
He cautioned that currency tailwinds that have supported non-core growth are expected to “diminish meaningfully beginning next quarter” as the dollar strengthens. He noted that about 40% of revenue is generated in non-U.S. dollar currencies.
Riggsbee also discussed cost pressures linked to global conditions. He said Neogen’s revenue exposure to countries within the Iran conflict zone is immaterial at less than $0.5 million annually. He said the company sources about $40 million annually in plastic OEM products and holds 6–9 months of inventory, suggesting the duration of elevated oil prices would need to be prolonged to materially affect costs. He added that the company is seeing higher freight and transportation costs due to disruptions around key transit routes such as the Suez Canal, with increases in the “high single digit to low double digit” range, equating to about $1.5 million per quarter of incremental freight and transportation costs at current rates.
On capital structure, Riggsbee said Neogen ended the quarter with $800 million of gross debt (68% fixed rate) and $159.9 million in cash, and remains compliant with debt covenants.
Riggsbee also reiterated the planned divestiture of the genomics business unit. He said the unit generated about $90 million in fiscal 2025 revenue with adjusted EBITDA margins in the mid-teens, and the announced sale price is $160 million, with expected net proceeds of about $140 million after transaction costs and taxes. The transaction is expected to close in the second quarter of fiscal 2027, with proceeds intended for debt reduction. Riggsbee said the company anticipates its net debt-to-adjusted EBITDA ratio will decline to below 3x by the end of calendar 2026. In response to an analyst question, management said the divestiture is expected to be accretive, with Riggsbee citing the unit’s below-corporate-average operating margins and the removal of some allocated corporate overhead.
Looking ahead, Nassif said the company plans to host an investor day in the fall to discuss the transformation’s impact and longer-term financial outlook, emphasizing that operational execution has been the company’s primary constraint and that progress is ongoing.
About Neogen (NASDAQ:NEOG)
Neogen Corporation is a global provider of food and animal safety products, offering a broad portfolio of diagnostic and testing solutions. Headquartered in Lansing, Michigan, the company develops and manufactures tests designed to detect foodborne pathogens, allergens and toxins in food, beverage and environmental samples. Since its founding in 1982, Neogen has focused on delivering rapid, accurate and user?friendly assays to food processors, grain handlers and quality laboratories around the world.
In the food safety arena, Neogen’s product lineup includes immunoassay kits, molecular diagnostics and enrichment media for pathogens such as Salmonella, Listeria and E.
