Neogen (NEOG) Piper Sandler 36th Annual Healthcare Conference summary

Financial Performance and Growth

• Preliminary Q2 revenue reached approximately $230 million, with sequential improvement in core growth rates and a return to positive growth in animal safety after an 8% decline in Q1.

• Margin improvement initiatives are underway, expected to take effect in Q3 and Q4, with primary benefits anticipated in H2 and further details to be shared during the January earnings call.

• Market share recovery is ongoing, with gains observed in both Q1 and Q2, following operational challenges that previously resulted in a $30 million headwind.

• Guidance for fiscal 2025 targets 2% reported growth at the midpoint, with FX fluctuations noted as a key variable.

• The company aims to be cash flow positive this fiscal year, targeting a debt to EBITDA ratio below three to enable renewed acquisition activity, and expects strong free cash flow generation as integration spending winds down.

Strategic Initiatives and Integration

• Integration of the 3M food safety business is nearly complete, with three of four manufacturing lines relocated and the final Petrifilm line expected to be fully operational within two years.

• Expansion into 16 new countries has been achieved, supported by over 900 customer-facing representatives and regional teams in LATAM, Asia Pacific, and Europe.

• Distribution challenges in animal safety were largely isolated to specific customers and have since improved, with positive sales trends emerging.

• No further ERP changes are planned for the remainder of the year, allowing focus on operational stability.

• Post-integration targets include MSD-HSD annual core revenue growth, 30%+ adjusted EBITDA margin, and net leverage below 2.0x.

Market Environment and Industry Trends

• The macro environment remains challenging, with prolonged unit declines among customers due to inflation, though the rate of decline is narrowing and core growth remains positive.

• Food safety demand is resilient and less sensitive to political shifts, as regulatory and consumer focus on safe food persists regardless of administration.

• Industry growth in food safety is estimated at mid-single digits in the current environment, with potential to return to high single digits as conditions normalize.

• Key growth drivers include rising food allergies, higher food standards, demand for organic products, and increased traceability requirements.

• Serves large, growing markets: $22B food safety (6-8% LT growth) and $55B animal safety (4-6% LT growth).