Detailed narrative
Quarter overview and timing effects
Neogen posted revenue of $222.8M with 8.1% core growth, the fifth consecutive quarter of core growth and an acceleration from Q4. About 300 bps of the benefit came from customer order timing expected in Q2 and an easy comparison against prior-year inventory adjustments at two large distributors. Management therefore points to H1 as the better trajectory indicator. Currency tailwind moderated as the dollar strengthened.
Food Safety
Food Safety revenue was $163.2M with 8.1% core growth, including about 400 bps from the timing items. Indicator testing and culture media (including Petrifilm) rose 11%, and bacterial and general sanitation grew 7% with double-digit pathogen detection growth. Food producer commentary suggests slightly improving volumes, though consumers remain pressured by inflation. Evolving regulation could lift testing independent of production.
Animal Safety
Animal Safety revenue was $59.6M with 8% core growth, including about 100 bps of timing benefit, a notable acceleration from Q4. Veterinary instruments led, with strong needles and syringes growth on improved supply, and biosecurity grew strongly on insect control. U.S. herd size remains at multi-decade lows with favorable pricing; farmers face elevated fuel and fertilizer costs.
Margins and cost structure
Adjusted gross margin was 49.8% (GAAP 47.4%), up 30 bps YoY on higher revenue, partly offset by deliberate investments in operational excellence and inventory optimization. Adjusted opex was about flat YoY: R&D and G&A investment offset lower sales and marketing from logistics savings, marketing centralization and the cleaners and disinfectants divestiture. Sequentially R&D saw the largest spend rise. Adjusted EBITDA margin expanded 170 bps.
Cash flow, balance sheet and divestiture
Free cash flow of $4.7M improved ~$18M YoY on higher operating cash flow and lower capex. Debt is ~$774M against $172M cash; $30M of term loan has been repaid since June. The genomics divestiture awaits Australia/New Zealand review, with ~$140M net proceeds earmarked for debt reduction. Treasury actions are underway to free up global cash.
Strategic priorities and Petrifilm transition
Priorities are commercial prowess (new sales operating model, weekly KPI reviews, global strategic accounts), high-impact innovation (largest investment area; Henelea hyperspectral imaging collaboration) and operational excellence (S&OP, inventory, continuous improvement). The first Petrifilm SKU achieved full validation, a derisking milestone, with the 17-SKU transfer to Lansing beginning next month.
Four gating items: customer continuity, safety stock, supplier management and disciplined sequencing. FDA-regulated products were under $10M in FY26.
Outlook
Guidance for revenue and adjusted EBITDA was raised, with genomics still included. Q2 is expected to be the lowest core growth quarter and H1 core growth about 3.5%. Margin gains are back-half weighted⚖️, driven by inventory write-off and sample collection improvements. Management reiterates meaningful YoY increases in operating and free cash flow.