Neogen's Q2 2026 Earnings Call: Contradictions Emerge on Petrifilm Timelines, Food Safety Growth, and Inventory Dynamics

Date of Call: January 8, 2026

Financials Results

• Revenue: $224.7 million, increasing 2.9% on a core basis YOY
• EPS: $0.10 adjusted earnings per share, compared to $0.04 in the prior quarter
• Gross Margin: 47.5% gross margin, a sequential improvement of 210 basis points from Q1; 50.3% excluding integration-related and restructuring costs
• Operating Margin: 21.7% adjusted EBITDA margin, an improvement of 470 basis points sequentially

Guidance:

• Revenue for FY2026 expected in the range of $845 million to $855 million.
• Adjusted EBITDA for FY2026 expected to be approximately $175 million.
• Revenue in Q4 expected to be modestly higher than Q3, with adjusted EBITDA margins following a similar trend.
• Capital expenditures for the year expected to be approximately $50 million.
• Free cash flow expected to be positive for the year.
• Divestiture of global genomics business expected to be announced in Q4 FY2026.

Business Commentary:

• Revenue Growth and Core Performance:
• Neogen Corporation reported total second quarter revenues of $224.7 million, increasing 2.9% on a core basis.

• The growth was driven by a return to positive core growth across the enterprise, particularly in Food Safety with core revenue growth of 4.1%.

• Margin Improvement and Cost Structure:

• The company's adjusted EBITDA margin improved by 470 basis points from the first quarter, reaching 21.7%.

• This improvement was primarily due to higher gross margins and headcount reductions implemented in the second quarter.

• Segment Performance and Product Category Growth:

• Food Safety segment revenues were $165.6 million, with strong growth in indicator testing and culture media, pathogens, and allergens.

• The growth was driven by a recovery in Petrifilm sales and increased demand in pathogens and allergens.

• Outlook and Strategic Initiatives:

• Neogen raised its full-year guidance, forecasting revenue in the range of $845 million to $855 million and adjusted EBITDA of approximately $175 million.
• The positive outlook is supported by strategic initiatives including divesting the genomics business and focusing on operational efficiency.

Sentiment Analysis:

Overall Tone: Positive

• CEO states: 'Our second quarter performance represents encouraging early progress with a return to positive core growth across the enterprise and adjusted EBITDA margins improving nearly 500 basis points sequentially.' and 'We are still in the early innings of our transformation journey... I have every confidence in our ability to exit this fiscal year as a stronger, leaner and more disciplined organization.'

Q&A:

• Question from Bob Labick (CJS Securities): Can you discuss what you look for in each of the people as you built out this team and how long it will take to get people on board and for everyone to gel and make a difference?
  Response: Attracted top-tier, experienced operators in diagnostics/life sciences; team is already hitting the ground running with a robust onboarding plan and focus on priorities.

• Question from Bob Labick (CJS Securities): What was the headwind to margins from sample handling and what would be the equivalent EBITDA margins at current levels once it improves?
  Response: Sample collection headwind was ~$3M in Q2 (down from $10M in Q4, $6M in Q1); expects to turn positive in H2, contributing to profitability.

• Question from David Westenberg (Piper Sandler): Why hasn't the implied H2 growth or margin a little bit higher following a really good quarter? Is this conservatism?
  Response: Guidance reflects a prudent, conservative approach given lingering macro headwinds, a new team settling in, and a focus on building credibility and predictable performance.

• Question from David Westenberg (Piper Sandler): Were there any onetime revenue tailwinds in the quarter and how do we think about recurring adjustments cycling through?
  Response: Only notable onetime tailwind was ~$2M from insecticide sales in Animal Safety; Q2 growth driven by commercial excellence focus on key products like Petrifilm, pathogens, and allergens.

• Question from Brandon Vazquez (William Blair): What in the commercial organization has changed that is working and giving you confidence to raise guidance already less than a year into the CEO seat?
  Response: Instituted a weekly latest best estimate forecasting process, driving simplicity, customer-centricity, and organizational alignment, leading to improved Q2 performance and forecast accuracy.

• Question from Brandon Vazquez (William Blair): What is giving you confidence that Petrifilm manufacturing is on time and what are you seeing in the early ramp?
  Response: Project on track for Nov 2027 timeline; late stages of production testing went well, initial product validation begun, and team has demonstrated ability to manufacture plates, with full focus and resources dedicated.

• Question from Thomas VonDerVellen (Guggenheim Securities): For the growth in indicator testing and culture media, how much was volume driven vs. price?
  Response: Growth was primarily organic, more volume than price; Petrifilm recovering from Q1 distributor inventory correction, pathogens growing due to rising illnesses, allergens back on sustained growth after resolving supply issues.

• Question from Thomas VonDerVellen (Guggenheim Securities): What are your updated assumptions around 2026 Petrifilm growth rate and is there pricing power still available?
  Response: Pricing power exists via inflationary adjustments in contracts as they renew; Petrifilm growth in Q2 reflects a return to normal distributor inventory, with remainder of year expected to look similar.

• Question from Tom DeBourcy (Nephron Research): Feedback from customers on willingness to work with you as you ramp up production and get back to normal inventory levels, and overall volume vs. price in organic growth?
  Response: Customers are rooting for Neogen, see it as a vital partner; sample collection stockouts have not damaged long-term relationships. Organic growth was more volume than price across categories.

Contradiction Point 1

Petrifilm Manufacturing Timeline and Confidence

This is a direct contradiction regarding a key capital project's timeline and the confidence level in its execution, which is critical for future capacity and revenue planning.

What specific changes in the commercial organization led to the first accurate forecast and early guidance raise during your tenure? - Brandon Vazquez (William Blair)

20260108-2026 Q2: Confidence comes from strong execution... The project remains on track for the November 2027 timeline. - Mikhael Nassif(CEO)

What clear KPIs are you highlighting for Petrifilm, SKU numbers, transition, CapEx targets, or other factors beyond timing of these projects? - Subhalaxmi T. Nambi (Guggenheim Securities, LLC)

2025Q4: Key milestones include starting test production in the near future, certifying SKUs over 4-5 quarters... - David H. Naemura(CFO)

Contradiction Point 2

Outlook for Food Safety Segment Growth

This represents a significant shift in the growth trajectory forecast for a core business segment, moving from a cautionary "low single-digit" outlook to one of confidence in "sustainable" growth.

Were there any one-time revenue tailwinds in the quarter? How should we assess recurring adjustments for the rest of the year? - David Westenberg (Piper Sandler)

20260108-2026 Q2: The strong growth was driven by a focus on commercial excellence... The organic growth is viewed as sustainable... - Mikhael Nassif(CEO)

Are macro conditions worsening sequentially, and do you have sequential guidance for margins this year? - Brandon Vazquez (William Blair & Company L.L.C.)

2025Q4: Food safety testing is expected to grow at a lower rate than historical mid-single digits, potentially in the low single digits... - David H. Naemura(CFO)

Contradiction Point 3

Nature and Impact of Distributor Inventory Dynamics

This is a substantive contradiction in explaining a key operational headwind. The characterization shifts from a resolved issue with positive customer feedback to an ongoing issue of uncertainty and commitment pause that caused a material shortfall.

好的，我现在需要处理用户提供的这个任务。用户希望我作为专业的金融文章作者，总结并精简来自美股上市公司财报电话会议的问答环节中的问题。首先，我要仔细阅读用户的具体要求，确保不遗漏任何细节。用户给出的例子是关于一个冗长的问题，需要简化成简洁、精准的形式，同时保持原意，符合美式英语习惯，并且只输出问题，保留问号结尾。用户还特别强调输出要符合美式英语的读写习惯，所以需要注意拼写和语法是否正确，比如使用美式拼写，如“organically”而不是英式拼写。首先，我需要分析用户提供的原始问题：“What feedback have you received from customers regarding stockouts and willingness to work with you? Also, what is the rough breakout of organic growth for the business in terms of volume vs. price?” 这个原始问题包含两个部分。第一部分询问客户关于缺货和合作意愿的反馈。第二部分询问有机增长在销量和价格方面的大致分解。我需要将这两部分分别简化，去掉冗余的词语，同时保留关键信息。对于第一部分，“What feedback have you received from customers regarding stockouts and willingness to work with you?” 可以简化为“What customer feedback have you received about stockouts and their willingness to collaborate?” 这里，“regarding”可以替换为“about”，更简洁；“work with you”可以改为“collaborate”，更正式且简洁。第二部分，“what is the rough breakout of organic growth for the business in terms of volume vs. price?” 可以简化为“What is the organic growth breakdown between volume and pricing?” 这里，“rough breakout”可以简化为“breakdown”，因为“rough”在这里可能指大致的，但问题核心是分解，所以可以省略；“for the business”可以去掉，因为上下文已经明确；“in terms of”可以替换为“between”，使句子更直接。接下来，我需要检查是否符合美式英语习惯，比如拼写是否正确，语法是否准确。确保问题简洁，没有多余的装饰词。同时，确保输出只包含简化后的问题，没有其他内容，并且每个问题以问号结尾。可能需要注意的点是，用户提到要确保输出且仅输出生成的简化后的问题，所以不需要任何额外的解释或格式。此外，要确认每个问题是否独立，或者是否需要合并。根据用户提供的例子，两个问题被合并成一个句子，用“Also”连接，但简化后的版本可能需要分开处理。不过，用户提供的例子中，两个问题被合并成一个句子，所以可能需要保持这种结构，但用分号或句号分开。不过用户给出的例子中，两个问题被合并成一个句子，用“Also”连接，但简化后的版本可能需要分开。需要确认用户是否接受合并后的结构还是需要分开。根据用户提供的例子，简化后的版本是两个问题合并成一个句子，用分号分隔，所以可能需要保持这种结构，但可能用户希望分开处理。不过用户提供的例子中的简化版本是分开的两个问题，用句号分隔，但可能用户希望保持原问题的结构。需要仔细检查用户提供的例子中的简化版本是否正确。用户提供的例子中，原始问题有两个部分，简化后的问题是两个独立的问题，用问号结尾。所以可能需要将两个问题分开处理，但用户提供的例子中，简化后的版本是两个问题合并成一个句子，用分号分隔，但可能用户希望分开成两个独立的问题。需要确认这一点。根据用户给出的例子，简化后的版本是两个问题合并成一个句子，用分号分隔，但可能用户希望分开处理。不过根据用户的要求，输出且仅输出生成的简化后的问题，所以可能需要保持两个问题合并的形式，但用分号分隔。或者可能用户希望将两个问题分开，每个问题单独作为一个句子。需要仔细分析用户的例子。在用户提供的例子中，原始问题有两个部分，用“Also”连接，简化后的版本是两个问题，用分号分隔。但用户可能希望将两个问题分开处理，每个问题独立。例如，用户给出的例子中，简化后的问题是两个独立的问题，用句号分隔，但可能用户希望用分号或保持一个句子。需要根据用户提供的例子来判断。用户提供的例子中的简化版本是：“What customer feedback have you received about stockouts and their willingness to collaborate? What is the organic growth breakdown between volume and pricing?”所以两个问题被分开，用句号分隔。因此，我需要确保每个问题独立，并且正确使用标点符号。此外，需要注意每个问题是否以问号结尾，这是用户特别强调的。总结下来，我需要将原始问题中的两个部分分别简化，确保每个问题独立，用问号结尾，并且符合美 - Tom DeBourcy (Nephron Research)

20260108-2026 Q2: Customer feedback globally has been very positive. Customers see Neogen as a vital partner... despite any frustration with supply issues. - Mikhael Nassif(CEO)

Quantify the magnitude and timeline of the destocking and hesitancy impact. Is a snapback expected? - David Westenberg (Piper Sandler)

2025Q3: The company does not characterize it as destocking but as a pause in inventory commitment due to uncertainty. The $6M shortfall in Q3 was split: ~$4M was broader macro/uncertainty... and the situation remains uncertain, and the impact may continue into Q4. - David Naemura(CFO/COO)

Contradiction Point 4

Guidance Prudence and Macro Headwinds

This contradiction involves the rationale and context for financial guidance, shifting from a baseline "business as usual" approach in a softening macro environment to a deliberate "prudent" approach in a stronger quarter, which signals a change in management's framing of the business cycle.

Why hasn't H2 implied growth/margin improved more despite strong Q2 results? Is this due to conservatism or ensuring accuracy? - David Westenberg (Piper Sandler)

20260108-2026 Q2: The guidance reflects a prudent approach to returning the business to sustainable performance... Despite this, the full-year guide was raised to reflect positive growth. - Mikhael Nassif(CEO)

With Mike as the new CEO, why is now the right time to provide guidance? Why are these the right numbers? How much prudence is included? - Subhalaxmi T. Nambi (Guggenheim Securities, LLC)

2025Q4: Guidance is provided as business continues as usual; the new CEO is not being signed up for anything out of the ordinary. The macro environment softened sequentially from Q3 to Q4 and is expected to continue being soft. - David H. Naemura(CFO) and John Edward Adent(CEO)

Contradiction Point 5

Outlook for Sample Collection Profitability

This is a material contradiction in the financial forecast for a specific product line, extending the timeline for return to profitability and reducing the expected profit level, which directly impacts segment margin projections.

What was the impact of sample handling on sequential margin improvement? After improvements, what is the current EBITDA margin, and how might it grow moving forward? - Bob Labick (CJS Securities)

20260108-2026 Q2: Sample collection... is a challenging product... It is expected to return to some profitability in the second half of the fiscal year. The product is not expected to be as profitable as others in the portfolio. - Mikhael Nassif(CEO)

What are the $6 million sample collection costs? Is this spoilage? Will it persist into next quarter? - David Westenberg (Piper Sandler)

2026Q1: Plan to return to positive by second/third quarter. - Dave Naemura(CFO)