- Revenue Growth: Total revenues reached $224.7M, reflecting a 2.9% core increase, with food safety segment revenue at $165.6M, up 4.1% core.
- Gross Margin & EBITDA: Sequential gross margin improvement to 47.5%, adjusted EBITDA of $48.7M (21.7% margin), driven by cost structure optimizations.
- Full-Year Guidance Update: Revenue raised to $845–855M, adjusted EBITDA to $175M, influenced by Q2 overperformance and strategic cost savings.
- Cost Savings & Leadership: $20M annualized savings from 2Q cost improvements, plus new leadership hires to drive growth and operational efficiency.
- Genomics Sale & Debt Reduction: CFO Brian Rigsby confirmed progress on selling the genomics business to accelerate debt repayment.
Segment Performance
The food safety segment was the key driver of growth, with indicator testing and culture media product categories performing well. The Animal Safety segment had flat core revenue growth. The growth in indicator testing and culture media was mainly volume-driven, with some pricing power still available in the market. Petri film growth was around 9%, driven by organic growth, with some pricing adjustments possible as new contracts come up for renewal.
Guidance and Outlook
The company raised its full-year guidance, expecting revenue to be in the range of $845 million to $855 million and adjusted EBITDA to be approximately $175 million. Neogen's new CFO, Brian Rigsby, stated that the company is making positive progress on the sale of its genomics business, which will help accelerate debt reduction. The company's guidance implies a cautious approach due to macroeconomic weaknesses, tariffs, and uncertainty.
Valuation and Metrics
With a P/S Ratio of 2.4 and EV/EBITDA of -4.25, the market seems to be pricing in a certain level of growth and profitability. Analysts estimate next year's revenue growth at 1.8%. The company's Net Debt / EBITDA ratio is 0.31, indicating a manageable debt level. The company's focus on cost structure improvements and leadership team strengthening is expected to drive top-line growth and profitability.
Operational Highlights
The company implemented cost structure improvements in the second quarter, expected to deliver approximately $20 million in annualized savings. Neogen's CEO, Mike Nassif, expressed confidence in the company's ability to overcome macroeconomic headwinds and execute on its transformation plan. The company strengthened its leadership team with new hires, including a chief commercial officer and a senior vice president and general manager of its food safety business unit.