NEOGEN CORP

Previous wording

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains both historical financial information and forward-looking statements. Neogen does not provide forecasts of future financial performance. While management is optimistic about the Company’s long-term prospects, historical financial information may not be indicative of future financial results.

Current wording

The information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains both historical financial information and forward-looking statements. Neogen does not provide forecasts of future financial performance. While management is optimistic about our long-term prospects, historical financial information may not be indicative of future financial results.

Previous wording

Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Quarterly Report on Form 10-Q, including statements relating to management’s expectations regarding new product introductions; the adequacy of our sources for certain components, raw materials and finished products; and our ability to utilize certain inventory. For this purpose, any statements contained herein that are not statements of historical fact are deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. There are a number of important factors that could cause Neogen’s results to differ materially from those indicated by such forward-looking statements, including many factors beyond our control. Factors that could cause actual results to differ from those contained within forward-looking statements include (without limitation) the continued integration of the 3M food safety business and the realization of the expected benefits from that acquisition; the relationship with and performance of our transition manufacturing partner; our ability to adequately and timely remediate certain identified material weaknesses in our internal control over financial reporting; competition; recruitment and retention of key employees; impact of weather on agriculture and food production; global business disruption caused by the Russia invasion in Ukraine and related sanctions and the conflict in the Middle East; identification and integration of acquisitions; research and development risks; intellectual property protection; increasing and developing government regulation; and other risks detailed from time to time in the Company’s reports on file at the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.

Current wording

Forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made throughout this Quarterly Report on Form 10-Q, including statements relating to management’s expectations regarding new product introductions; the adequacy of our sources for certain components, raw materials and finished products; and our ability to utilize certain inventory. For this purpose, any statements contained herein that are not statements of historical fact are deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates,” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. There are a number of important factors that could cause Neogen’s results to differ materially from those indicated by such forward-looking statements, including many factors beyond our control. Factors that could cause actual results to differ from those contained within forward-looking statements include (without limitation) the continued integration of the 3M food safety business and the realization of the expected benefits from that acquisition; the relationship with and performance of our transition manufacturing partner; our ability to adequately and timely remediate certain identified material weaknesses in our internal control over financial reporting; competition; recruitment and retention of key employees; impact of weather on agriculture and food production; global business disruption caused by the Russia invasion in Ukraine and related sanctions and conflict in the Middle East; identification and integration of acquisitions; research and development risks; intellectual property protection; increasing and developing government regulation; and other risks detailed from time to time in our reports on file at the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q.

Previous wording

In addition, any forward-looking statements represent management’s views only as of the date this Quarterly Report on Form 10-Q was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. Except to the extent legally required to do so, the Company specifically disclaims any obligation to update forward-looking statements, even if its views change.

Current wording

In addition, any forward-looking statements represent management’s views only as of the date this Quarterly Report on Form 10-Q was first filed with the Securities and Exchange Commission and should not be relied upon as representing management’s views as of any subsequent date. Except to the extent legally required to do so, we specifically disclaims any obligation to update forward-looking statements, even if our views change.

Previous wording

In prior years, production was negatively impacted by broad supply chain challenges and labor market disruptions. Additionally, input cost inflation, including increases in certain raw materials, negatively impacted operating results. In fiscal year 2024, despite a slowing rate of inflation, there were economic headwinds of softening consumer demand and higher interest rates, coupled with ongoing geopolitical tension in certain regions.

Current wording

In recent years, input cost inflation, including increases in certain raw materials, negatively impacted operating results. Although the rate of inflation has eased, we continued to face economic headwinds, including softening consumer demand, elevated interest rates, and ongoing geopolitical tensions in certain regions.

Previous wording

Interest rates have risen sharply, particularly in fiscal year 2023, as a way to combat inflation. This increased our borrowing costs and raised the overall cost of capital. Although the federal funds rate was reduced in 2024 and there are indications of future rate cuts, the overall interest rate we pay on our Credit Facilities remains higher than when the debt was incurred in 2022, which increases interest expense on the unhedged portion of our Term Loan. In response to the historically high inflationary environment, we took pricing actions to mitigate the impacts on the business in the prior two fiscal years. The impact of inflation continues to affect us in the current fiscal year, although at a lower rate compared to prior fiscal years.

Current wording

Elevated interest rates have led to higher borrowing costs and an increased overall cost of capital. In response to the historically high inflationary environment, we took pricing actions to mitigate the impacts on the business in prior fiscal years. Although the federal funds rate was reduced in recent fiscal years and we have refinanced our Term Loan and revolving line of credit, the overall interest rate we pay on our Credit Facilities remains higher than when the debt was incurred, which increases interest expense on the unhedged portion of our Term Loan.

Previous wording

Beginning in the first half of fiscal year 2024, we implemented a new enterprise resource planning system and exited our transition distribution agreements with 3M, which led to certain shipment delays and an elevated backlog of open orders, specifically in the Food Safety segment. At the conclusion of fiscal year 2024, order fulfillment issues were largely resolved, however, the impact of lost market share stemming from these fulfillment issues has continued in fiscal year 2025. Also in fiscal year 2025, we have experienced negative impacts from delays in restarting full production of our sample collection product line, which we relocated from 3M into a Neogen facility. However, at the end of the third quarter of this fiscal year, we resolved these delays, with production having returned to the prior normal levels. With a change in administration in fiscal year 2025, there has been an economic policy shift towards increasing tariffs, which in turn has led and could lead to further retaliatory tariffs. These have the potential to negatively impact our international sales, as the majority of our purchases and production is done within the U.S.

Current wording

Beginning in the first half of fiscal year 2024, we implemented a new enterprise resource planning system and exited our transition service agreements with 3M, which led to certain shipment delays and an elevated backlog of open orders, specifically in the Food Safety segment. At the conclusion of fiscal year 2024, order fulfillment issues were largely resolved, however, the impact of lost market share stemming from these fulfillment issues continued in fiscal year 2025. Also in fiscal year 2025, we experienced an elevated amount of inventory write-offs, particularly in the fourth quarter, due, in part, to expiration of certain inventory held at our international locations stemming from supply chain and distribution challenges in fiscal year 2024. Further, in fiscal year 2025, we experienced negative impacts from delays in restarting full production of our sample collection product line, which we relocated from 3M into a Neogen facility. In the second half of fiscal year 2025, production increased to the prior normal levels, but with significant production inefficiencies. These production inefficiencies continued in first quarter of fiscal year 2026, with the expectation that they will be reduced continuously throughout the fiscal year.

Previous wording

Within the Food Safety industry, the end market continues to have a lower level of food production, partly due to significant inflation in food prices. However, there has generally been gradual end market improvement that has coincided with an increasing focus on food safety from both consumers and regulators. Within Animal Safety, the end market is at or near cyclical lows. As a result, we are optimistic about future revenue growth in the segment, particularly if the distribution channel begins to meaningfully restock inventory.

Current wording

Within the Food Safety industry, the end market generally continues to experience a lower level of food production, largely due to the cumulative effect of the significant recent inflation, particularly in food prices. However, there have been signs of sequential improvement from prior quarters related to food production volumes. Within Animal Safety, the end market is at or near cyclical lows. As a result, we are optimistic about potential future revenue growth in the segment, particularly if the distribution channel begins to meaningfully restock inventory.

Previous wording

The restructuring actions undertaken in our genomics business have resulted in the voluntary attrition of revenue, following the shift in focus already made away from smaller production animals. A portion of our genomics business also serves the companion animal market, which has been experiencing weakness recently, primarily due to the impact of continued inflation, a lower number of pet adoptions, and a higher level of customer in-sourcing.

Current wording

In fiscal year 2025, restructuring actions in our genomics business led to voluntary revenue attrition, following our strategic shift away from smaller production animals. A portion of our genomics business also serves the companion animal market, which has been experiencing weakness recently, primarily due to the impact of continued inflation, a lower number of pet adoptions, and a higher level of customer in-sourcing.

Previous wording

We continue to evaluate the nature and extent to which these issues impact our business, including consolidated results of operations, financial condition and liquidity. We expect these issues to continue to impact us throughout the remainder of fiscal year 2025.

Current wording

We continue to evaluate the nature and extent of these issues and their impact our business, including consolidated results of operations, financial condition and liquidity. We expect these issues to continue to impact us in fiscal year 2026.

Previous wording

Revenue decreased $7.8 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. The decrease included a $7.1 million unfavorable foreign exchange rate impact and a $1.2 million unfavorable impact due to discontinued product lines, offset by $0.5 million of growth in the business. The increase in the business was driven by new sales in the food quality and nutritional analysis product line paired with continued strength in indicator testing and pathogens product lines. These were partially offset by reduced sales of sample collection products due to production constraints, lower genomics volume due primarily to weakness in the companion animal market and a decline in sales of veterinary instruments, which have been impacted by tariffs.

Current wording

Revenue decreased $7.8 million during the three months ended August 31, 2025 compared to the three months ended August 31, 2024. The decrease includes a $9.6 million unfavorable impact due to divestitures and discontinued product lines, primarily from the divestiture of our Cleaners & Disinfectants business, offset by a $1.1 million favorable foreign exchange rate impact and $0.7 million of growth in the business. The increase in the business was driven by higher sales of insect control products and genomics services, continued strength in the pathogen detection product line, and sample collection products, as we reduced our backlog. These increases were offset by lower sales of Petrifilm, rodent control products, natural toxins test kits, and a decline in sales of veterinary instruments, which have been negatively impacted by tariffs. The lower level of Petrifilm sales compared to the prior year period was due primarily to channel inventory rebalancing related to switching distributors in Asia and the normalization of buying patterns at a large distributor in the U.S.

Previous wording

Service revenue, which consists primarily of genomics services provided to animal production and companion animal markets, was $24.5 million and $72.6 million during the three and nine months ended February 28, 2025 and $26.6 million and $77.0 million during the three and nine months ended February 29, 2024, respectively. The decrease in the three and nine months ended February 28, 2025 was primarily due to lower genomics sales into the companion animal market, as well as lower sales into the domestic poultry market, primarily due to a shift in focus towards large production animals, offset by an increase in genomics sales into beef markets.

Current wording

Service revenue, which consists primarily of genomics services provided to animal production and companion animal markets, was $25.1 million during the three months ended August 31, 2025 and $24.4 million during the three months ended August 31, 2024. The increase was mainly due to higher revenue in genomics services.

Previous wording

General and administrative expenses include amortization expense relating to definite-lived intangible assets of $23.3 million and $70.4 million during the three and nine months ended February 28, 2025 and $23.7 million and $71.1 million during the three and nine months ended February 29, 2024, respectively. Estimated amortization expense for fiscal years 2025 through 2029 is expected to be in the range of approximately $90 million to $96 million per year.

Current wording

General and administrative expenses include amortization expense relating to definite-lived intangible assets of $23.0 million and $23.6 million during the three months ended August 31, 2025 and August 31, 2024, respectively. Estimated amortization expense for fiscal year 2026 through 2030 is expected to be in the range of approximately $89 million to $94 million.

Previous wording

Research and development expense was $4.5 million and $14.8 million during the three and nine months ended February 28, 2025 and $4.9 million and $17.3 million during the three and nine months ended February 29, 2024, respectively. The decrease during the three and nine months ended February 28, 2025 is primarily the result of lower contracted services and employee costs in the Food Safety segment, as we continue to realize synergies in certain areas from the 3M FSD business.

Current wording

Research and development expense was $5.1 million during the three months ended August 31, 2025 and $5.2 million during the three months ended August 31, 2024, respectively. The decrease during the three months ended August 31, 2025 is primarily the result of lower contracted services and employee costs.

Previous wording

Income tax expense was $1.2 million during the three months ended February 28, 2025 and income tax benefit was $22.1 million during the nine months ended February 28, 2025 compared to income tax benefit of $3.8 million and $3.9 million during the three and nine months ended February 29, 2024. Income tax expense for the quarter is related to changes in the Company’s forecasted pre-tax income using an estimated annualized effective tax rate. The net tax benefit for the nine month period is primarily related to pre-tax losses due to amortization expense and interest expense from the 3M FSD acquisition as well as an income tax benefit of $9.2 million associated with goodwill impairment charges. The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. We are closely monitoring developments and evaluating the impact these new rules will have on our tax rate, including eligibility to qualify for certain safe harbors. Where no safe harbor is met, we have included in our income tax for the three and nine months ended February 28, 2025, a forecasted amount of “top-up” tax for our foreign subsidiaries as required under the applicable rules of the countries that have adopted the Pillar Two directives.

Current wording

Income tax expense was $7.5 million during the three months ended August 31, 2025 compared to income tax benefit of $3.0 million during the three months ended August 31, 2024. The net tax expense for the three months ended August 31, 2025, is primarily related to pre-tax income due to gains on the sale of our Cleaners & Disinfectants business.

Previous wording

Revenue for the Animal Safety segment decreased $2.8 million during the three months ended February 28, 2025 compared to the three months ended February 29, 2024. The decrease was due to a $1.8 million decrease in the business, a $0.7 million impact from discontinued product lines and a $0.3 million unfavorable currency impact. The decline in the business was primarily related to decreased sales of veterinary instruments, which have been impacted by tariffs, and lower genomics volume, due primarily to weakness in the companion animal market. These decreases were partly offset by continued strength in rodent control products.

Current wording

Revenue for the Animal Safety segment decreased $0.5 million during the three months ended August 31, 2025 compared to the three months ended August 31, 2024. The decrease was due to $3.7 million of discontinued products and the divestiture of our Cleaners and Disinfectants business, a $0.1 million negative foreign currency impact, partially offset by $3.3 million growth in the business. The growth in the business was primarily related to stronger sales of our insect control, genomics, and animal care products lines. These increases were offset by decreased sales of veterinary instruments, which have been negatively impacted by tariffs.

Previous wording

The increased corporate expense during each comparable period related to headcount increases, increases in equity-based compensation and costs associated with our new enterprise resource planning system.

Current wording

The increased corporate expense during each comparable period is related to headcount increases, increases in equity-based compensation, one-time transaction and project expenses, and certain corporate development initiatives.

Previous wording

We are subject to certain legal and other proceedings in the normal course of business that have not had, and, in the opinion of management, are not expected to have, a material effect on our results of operations or financial position.

Current wording

We are subject to certain legal and other proceedings that have not had, and, in the opinion of management, are not expected to have, a material effect on our results of operations or financial position.

Previous wording

As of February 28, 2025, we had cash and cash equivalents of $127.7 million, and borrowings available under our revolving line of credit of $150.0 million.

Current wording

As of August 31, 2025, we had cash and cash equivalents of $138.9 million, and borrowings available under our revolving line of credit of $201.5 million.

Previous wording

There are no required principal payments on our Credit Facilities through fiscal year 2026. Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of February 28, 2025, the Company was in compliance with all financial covenants under the Credit Facilities.

Current wording

Since we elected to make prepayments in the first quarter of fiscal year 2026, there are no additional required principal payments for the Term Loan for fiscal year 2026. Financial covenants include maintaining specified levels of funded debt to EBITDA, and debt service coverage. As of August 31, 2025, we are in compliance with all financial covenants under the Credit Facilities.

Previous wording

We continue to make investments in our business and operating facilities. Our estimate for capital expenditures in fiscal year 2025 is $100 million. This includes approximately $70 million in capital expenditures related to integration of the acquired 3M FSD products, the most significant portion of which is related to the construction of, and acquisition of equipment for, our new manufacturing facility in Lansing, Michigan.

Current wording

We continue to make investments in our business and operating facilities. Our estimate for capital expenditures in fiscal 2026 is approximately $50 million. This includes approximately $35 million in capital expenditures related to the integration of the acquired 3M FSD products, the most significant portion of which is related to the construction of equipment for our new manufacturing facility in Lansing, Michigan.

Previous wording

Net Cash provided by Operating Activities

Current wording

Net cash provided by operating activities increased $28.8 million during the three months ended August 31, 2025 compared to the three months ended August 31, 2024. The increase is due to improvement in working capital primarily associated with accounts receivable and accounts payable, offset by a decline in operating income.

Previous wording

Net Cash used for Investing Activities

Current wording

Net Cash provided by (used for) Investing Activities

Previous wording

Net Cash provided by Financing Activities

Current wording

Net Cash (used for) provided by Financing Activities