Neogen(NEOG) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company's third quarter revenues were $221 million, with core revenue growth of 20 basis points, negatively impacted by foreign currency by 310 basis points compared to the prior year [28][34] - Adjusted EBITDA was$49 million, representing a margin of 22%, with a year-over-year decline driven primarily by lower revenue levels [34] - Gross margin decreased to 49.9%, down 120 basis points from 51.1% in the same quarter a year ago, primarily due to lower revenues [33] Business Line Data and Key Metrics Changes - Food safety segment revenues were $153 million, down 3.2$68 million, with a core revenue decline of 2.6% compared to the prior year [28] Market Data and Key Metrics Changes - Latin America saw double-digit core revenue growth, while Asia-Pacific experienced mid-single-digit growth, and Europe was down mid-single digits [31][32] - The U.S. and Canada region faced mid-single-digit declines, primarily due to carryover impacts from previous shipping delays [32] Company Strategy and Development Direction - The company is focused on improving production efficiency and addressing challenges in the sample collection product line, which has recently returned to prior production levels [15][18] - Strategic actions are being taken to restructure the genomics business, focusing on the differentiated bovine product offering [17][27] - The company is prioritizing debt repayment and improving cash flow through refinancing efforts and reducing capital expenditures [20][21] Management's Comments on Operating Environment and Future Outlook - Management noted a broad development of uncertainty related to U.S. government policies, including spending cuts and tariffs, which could impact food safety testing [7][9] - The company expects the current dynamic environment to continue affecting revenue guidance, with an updated full-year revenue outlook of approximately 895 million [25][38] - Management remains optimistic about the long-term growth opportunities despite current macroeconomic challenges [51] Other Important Information - The company completed the refinancing of its Term Loan A, extending maturity by close to three years and achieving 60 basis points of interest rate savings [20][36] - The leadership team has undergone changes, including new heads for R&D and North America Commercial Organization, to enhance operational effectiveness [22] Q&A Session Summary Question: How much of the lowered guidance is due to macro factors? - Management indicated that approximately 4 million of the $6 million revenue shortfall in Q3 was due to macro uncertainty, with$2 million specifically from China [57][58] Question: Are tariff headwinds affecting margins or sales? - Management clarified that tariff impacts would affect both margins and sales, with an estimated $30 million impact from tariffs, predominantly from China [72][74] Question: What are the critical objectives for the remainder of the year? - Key objectives include driving production efficiency in Petri film manufacturing and managing costs to align with new revenue levels [90][92]